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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1997
COMMISSION FILE NUMBER 0-4281
ALLIANCE GAMING CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 88-0104066
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
6601 S. BERMUDA RD.
LAS VEGAS, NEVADA 89119
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER: (702) 270-7600
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $0.10 PAR VALUE
15% NON-VOTING SENIOR PAY-IN-KIND SPECIAL STOCK, SERIES B, $0.10 PAR VALUE
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the common equity held by non-affiliates of the
registrant was approximately $95,204,000 as of September 2, 1997.
The number of shares of Common Stock, $0.10 par value, outstanding as of
September 2, 1997 according to the records of registrant's registrar and
transfer agent, was 31,854,834.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for its Annual Meeting
of Stockholders will be filed with the Securities and Exchange Commission within
120 days of the end of the Company's fiscal year and is incorporated by
reference into Part III of this Form 10-K.
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ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
PART I
ITEM 1. BUSINESS
INTRODUCTION
Alliance is a diversified, worldwide gaming company that (i) designs and
manufactures gaming machines and computerized monitoring systems for gaming
machines, (ii) owns and manages a significant installed base of gaming machines,
(iii) owns and operates two casinos and (iv) in Germany, is a full-service
supplier of wall-mounted gaming machines and amusement games. Alliance has
achieved a leading market position for each of its business units. Operating
under the name Bally Gaming, the Company is the second largest slot and video
gaming machine manufacturer in North America, with over 86,000 gaming machines
sold during the past five years. Operating under the name Bally Systems, the
Company designs, integrates and sells highly specialized computerized monitoring
systems that provide casinos with networked accounting and security services for
their gaming machines. Systems has a leading position, with over 79,000 game
monitoring units ("GMUs") installed worldwide. The Company also owns, operates
and services an installed base of over 6,600 slot and video gaming machines
which are located mostly in non-casino venues in Nevada and Louisiana ("Route
Operations"). Alliance is the largest route operator in Nevada and the largest
operator of gaming machines at racetracks in Louisiana. Alliance also owns and
operates what management believes is the most profitable riverboat casino in
Vicksburg, Mississippi and a small casino in Sparks, Nevada, which together have
30 table games and 1,100 gaming machines (collectively, "Casino Operations"). In
addition, operating under the Bally Wulff name, the Company believes that it is
now the leading supplier of wall-mounted gaming machines and arcade games in
Germany
The Company was incorporated in Nevada on September 30, 1968 under the name
Advanced Patent Technology. The Company changed its name to Gaming and
Technology, Inc. in 1983, to United Gaming, Inc. in 1988 and to Alliance Gaming
Corporation on December 19, 1994. The Company conducts its gaming operations
through directly and indirectly owned subsidiaries. On June 18, 1996 the Company
acquired Bally Gaming International, Inc. which includes the Gaming Equipment
and Systems and Wall Machines and Amusement Games business units. The term
"Company" as used herein refers to Alliance Gaming Corporation and subsidiaries
unless the context otherwise requires. The Company's principal executive offices
are located at 6601 South Bermuda Road, Las Vegas, Nevada 89119; telephone (702)
270-7600.
BUSINESS UNITS
GAMING EQUIPMENT AND SYSTEMS
Bally Gaming
Overview. The Company's primary markets for its gaming machine products are the
United States, Canada and Europe and Latin America, and, to a lesser extent, the
Far East and the Caribbean. The following table sets forth the percentage of new
unit sales by market segment during the periods indicated:
<TABLE>
<CAPTION>
NEW UNITS BY MARKET SEGMENT PERCENTAGE OF NEW UNITS SOLD
Years ended Six months Year ended
December 31, ended June 30, June 30,
1994 1995 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Nevada and Atlantic City 34% 42% 37% 47%
International 21 30 45 40
Riverboats 31 12 11 5
Indian Gaming 13 14 7 7
Other (principally VLTs) 1 2 --- 1
--- --- --- ---
100% 100% 100% 100%
=== === === ===
</TABLE>
2
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ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
United States Markets. Within the United States, Nevada represents the largest
installed base of gaming machines with an installed base of approximately
180,000 machines as of June 30, 1997. The Company estimates that Atlantic City,
the second largest market, had an installed base of approximately 33,000
machines as of June 30, 1997. Product sales of the Company's casino-style gaming
equipment in these markets are primarily to established casino customers to
either replace existing machines or as part of an expansion or refurbishment of
the casino. Also, because gaming machine revenues have increased at a higher
rate than table game revenues over the past decade, casino operators have
frequently increased floor space dedicated to gaming machines. In addition,
major casino openings in Nevada, expansions of existing casinos and the
proliferation of casinos in emerging markets have created additional floor space
available for new gaming products and are anticipated to further increase
competitive pressures on casino operators to replace existing equipment with new
machines on an accelerated basis.
Riverboat casinos began operating in 1991 and, as of June 30, 1997, riverboat
casinos were operating in Indiana, Iowa, Illinois, Mississippi, Missouri and
Louisiana. The estimated installed base of gaming machines on riverboats is
approximately 82,000 machines as of June 30, 1997.
Casino-style gaming continues to expand on Native American lands. Native
American gaming is regulated under the Indian Gaming Regulatory Act of 1988
which permits specific types of gaming. The Company's machines are placed only
with Native American gaming operators who have negotiated a compact with the
state and received approval by the U.S. Department of the Interior. The Company
has, either directly or through its distributors, sold machines for casinos on
Native American lands in Arizona, Connecticut, Iowa, Michigan, Minnesota,
Mississippi, Montana, New Mexico, North Dakota, South Dakota and Wisconsin.
Compacts have also been approved in Oregon, Colorado and Louisiana, although
Gaming made no deliveries in these jurisdictions. In addition to the approved
states, compacts are under consideration in several states, including Alabama,
California, Maine, Massachusetts, Rhode Island, Texas and Washington. The
installed base of all Native American gaming machines as of June 30, 1997 was
approximately 70,000 units.
In addition, there are currently casinos in Colorado and South Dakota. The
estimated installed base of machines in these markets as of June 30, 1997 was
approximately 15,000 machines.
The continued growth of domestic emerging markets for gaming machines is
contingent upon the public's acceptance of gaming and an ongoing regulatory
approval process by Federal, state and local governmental authorities.
Management cannot predict which new jurisdictions or markets, if any, will
approve the operation of gaming machines, the timing of any such approval or the
level of the Company's participation in any such new markets.
International Markets. In addition to the domestic markets, the gaming industry
is also expanding in international markets. The Company's primary international
markets are Europe, Canada and Latin America, and, to a lesser extent, the Far
East and the Caribbean. The Company has begun, and plans to continue, expansion
into the Australian market, and in 1995, Gaming established an office in Sydney,
Australia. The Company recorded its first sale into the Australia market in the
quarter ended June 30, 1996. One of the Company's indirect subsidiaries, Bally
Gaming International, GmbH ("GmbH") distributes gaming machines, manufactured
primarily by Gaming, through its sales office in Hannover, Germany principally
to customers in Europe and Russia, and through its sales office in Johannesburg,
South Africa, principally to customers on the African continent.
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ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
The percentage of Gaming's international revenues by geographic area for the
periods indicated are set forth below:
<TABLE>
<CAPTION>
NEW UNITS BY GEOGRAPHIC AREA PERCENTAGE OF NEW UNITS SOLD
Years ended Six months Year ended
December 31, ended June 30, June 30,
1994 1995 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Europe 56% 51% 40% 33%
Canada 17 22 31 26
Latin America 20 20 25 39
Far East 4 4 2 2
Other 3 3 2 ---
--- --- --- ---
100% 100% 100% 100%
=== === === ===
</TABLE>
Products. Gaming designs, manufactures and distributes a variety of electronic
slot and video gaming machines. Machines are differentiated from one another by
graphic design and theme, cabinet style and size, payout, reel-type design and
minimum/maximum betting amount. Slot machines are normally produced to specific
order, with design and configuration customized to a customer's particular
requirements. Customers may also change from one gaming model to another gaming
model by ordering a "conversion kit" which consists of artwork, reel strips and
a computer chip. Gaming's video gaming machines are designed to (i) simulate
various live card games and keno through a video display and (ii) for Game
Maker(R) gaming machines, offer the player the chance to play up to ten games.
New games and themes are introduced periodically in order to satisfy customer
demand and to compete with product designs introduced by competitors. Gaming
introduced its "ProSeries(tm)" reel-type slot machines during late 1993 and its
multi-game touch screen machine, the Game Maker(R), during late 1994.
The Game Maker(R) can offer up to 10 different video games within one gaming
device. The ten games can be selected by the casino from a game library that has
over 300 games. The games simulate various card games, keno and popular
reel-spinning games. The Game Maker(R) machines contain bill acceptors and many
other features believed to be popular with casinos and their customers. The Game
Maker(R) machines are available in upright, bar top and slant top cabinets.
Revenues from sales of Game Maker(R) machines were approximately $6.7 million
and $27.4 million during the years ended December 31, 1994 and 1995,
respectively, $12.9 million for the six months ended June 30, 1996 and $34.9
million for the year ended June 30, 1997.
The ProSeries(tm) was the result of a comprehensive product development effort
which began in 1991. The development process included extensive testing of the
new products in-house and on casino floors for reliability and player appeal.
Revenues from sales of ProSeries(tm) machines were approximately $86.2 million
and $57.1 million during the years ended December 31, 1994 and 1995
respectively, $38.5 million for the six months ended June 30, 1996 and $66.6
million the year ended June 30, 1997.
Gaming typically offers a 90-day labor and up to a one-year parts warranty for
new gaming machines sold and is actively involved in customer service after the
original installation. Gaming provides several after-sale, value-added services
to its customers including customer education programs, a 24-hour customer
service hot-line, and field service support programs and spare parts programs.
Gaming's historical warranty expense as a percentage of revenues has been less
than 1%.
In addition, Gaming sells and services used gaming machines and sells parts for
existing machines. Gaming often accepts used machines as trade-ins toward the
purchase of new gaming equipment. While a small secondary market exists in the
United States, used machines are typically resold into the international market.
Some used equipment is reconditioned for direct sale, but much is sold in
container lots on an "as is" basis through independent brokers.
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ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
Sales of used equipment were $4.2 million and $9.2 million during the years
ended December 31, 1994 and 1995, respectively, $2.0 million for the six months
ended June 30, 1996 and $5.4 million for the year ended June 30, 1997.
The following table sets forth the percentages of revenues provided by each of
its major product lines for the periods indicated:
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
Years ended Six months Year ended
December 31, ended June 30, June 30,
1994 1995 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Slot machines 74% 53% 63% 55%
Video gaming machines 16 31 24 30
Other (primarily used machines,
parts and services) 10 16 13 15
--- --- --- ---
100% 100% 100% 100%
=== === === ===
</TABLE>
Gaming machines have a mechanical life that can exceed 10 years. However, in the
established markets, Gaming's experience is that casino operators usually
replace gaming machines after three to seven years. The factors which result in
replacement of gaming machines sooner than their mechanical life include
technological advances, development of new games, new sound and visual features
and changing preferences of casino patrons. Casinos typically recoup the
purchase cost of their electronic gaming machines in a few months, which allows
casinos to replace machines with new models that are popular with casino
patrons.
In the past, Gaming had designed, manufactured and distributed video lottery
terminals ("VLT"), which are generally operated by, or under the regulation of,
state or provincial lottery commissions. The VLT business was less than 2% of
revenues during the years ended December 31, 1994 and 1995, and less than 1%
during the six months ended June 30, 1996 and the year ended June 30, 1997.
Product Development. The Company believes that technological enhancements are
the key to meeting the demands of casinos for new gaming machines. Most gaming
machines on casino floors today are driven by technology which was developed
over 20 years ago. The Company believes that accelerating the use of existing
computer technology will give its gaming machines and systems a competitive
advantage in the gaming industry. Total spending on product research and
development by Gaming was $3.5 million, $3.7 million, $1.8 million and $4.0
million during the years ended December 31, 1994 and 1995, the six months ended
June 30, 1996 and the year ended June 30, 1997, respectively.
Gaming develops its products for both the domestic and international market.
Gaming's product development process is divided into two areas, hardware and
software. Major areas of hardware development include cabinet style, electronic
capability, machine handle, coin hopper and bill acceptor. Hardware development
efforts are focused upon player appeal, product reliability and ease of
maintenance. Development cycles for hardware can range from a few days for
simple enhancements to more than a year for new electronics or new mechanical
packages.
The software development process for new games, which includes graphics
development, involves a continuous effort requiring relatively significant human
resource allocations. Creativity in software development is an important element
in product differentiation as the major manufacturers sometimes use similar
hardware technology. Ideas for new models are generated both internally and from
customers. Gaming can design the software and artwork for a new model in as
little as two weeks, excluding regulatory approval. All new or modified hardware
and software is designed to satisfy all applicable testing standards and must
receive the approval of the appropriate gaming regulatory agency based on
substantially satisfying such applicable testing standards before such gaming
product can be offered for play to the public. Most gaming jurisdictions rely
upon and accept the certification of selected independent laboratories that a
gaming product meets the applicable testing standards.
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ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
Regulatory approval for new or modified hardware and software changes takes from
30 days to three months or more. On an annual basis, Gaming expects to introduce
approximately 25 new games to the market. However, no assurance can be made with
respect to the rate of new model introductions or the obtaining of regulatory
approvals in respect thereof.
Sales and Marketing. Gaming uses a direct sales force, an independent
distributor network and GmbH to sell its products. Gaming's sales staff of
approximately 25 people, which operates offices in Nevada, New Jersey,
Mississippi, Illinois, Colorado and Florida, generated approximately 78% of new
machine sales over the calendar years 1994 and 1995 and 81% and 89% of new
machine sales for the six months ended June 30, 1996 and the year ended June 30,
1997, respectively. On a limited basis, Gaming uses distributors for sales to
certain specific markets in the United States as well as certain international
jurisdictions. Gaming's agreements with distributors do not specify minimum
purchases but generally provide that Gaming may terminate such agreements if
certain performance standards are not met. Approximately 8% of new gaming
machine unit sales for the calendar years 1994 and 1995 and 2% and 4% for the
six months ended June 30, 1996 and the year ended June 30, 1997, respectively,
were generated through independent distributors (including foreign
distributors). Approximately 8% of new gaming machine unit sales for the
calendar years 1994 and 1995 and 2% and 7% for the six months ended June 30,
1996 and the year ended June 30, 1997, respectively, were generated through
GmbH.
In addition to offering an expansive product line, Gaming provides customized
services in response to specific casino requests. These services include high
quality silkscreen printing of gaming machine glass, customized game development
and interior design services. Gaming also offers customized design services that
utilize computer aided design and studio software programs. Gaming's design
department can generate a casino floor layout and can create a proposed slot mix
for its customers. In many of the emerging markets, Gaming provides assistance
to customers including the selection of related equipment such as slot stands,
chairs, etc. and a recommended layout of the casino floor as well as a mix of
machine models. Sales to established casinos in Nevada can require completion of
a successful trial period for the machines in the casino.
For the year ended June 30, 1997, approximately 85% of Gaming's slot and video
gaming machine sales were on terms of 90 days or less. Approximately 15% of
Gaming's sales, primarily in certain emerging markets such as riverboat and
Native American gaming casinos, are financed over extended periods as long as 36
months and bear interest at rates ranging from 8% to 14%. International sales
are generally consummated on a cash basis or financed over two years or less. In
addition, in certain situations Gaming has participated in the financing of
other gaming related equipment manufactured by third parties in the emerging
markets. Management believes that financing of customer sales is an important
factor in certain emerging markets.
Customers. The demand for slot machines and video gaming machines varies
depending on new construction and renovation of casinos and other facilities
with needs for new equipment as well as the replacement of existing machines
(which have an average replacement cycle of three to seven years). For the year
ended December 31, 1995, the six months ended June 30, 1996 and the year ended
June 30, 1997, Gaming's largest customer accounted for approximately 5%, 8% and
11% respectively of Gaming's revenues, while Gaming's ten largest customers
accounted for approximately 25%, 42% and 45% of Gaming's revenues during such
periods, respectively.
Assembly Operations. Gaming's Las Vegas facility was completed in 1990
specifically for the design, manufacture and distribution of gaming equipment.
The 150,000-square foot facility was designed to meet fluctuating product design
demands and volume requirements, and management believes the facility enables
Gaming to increase production without significant capital expenditures.
Management believes that its assembly operations allow for rapid generation of
different models to fill orders quickly and efficiently. Another major advantage
of the existing plant operation is the system by which machines can be altered
in many ways including the size, type and color of glass, sound and payoff
patterns to produce a "customized" product for each customer. Gaming keeps an
inventory of parts that allow machines to be altered quickly to conform with a
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ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
particular customer's design/feature request. Gaming produces products for
individual customer orders and therefore finished goods inventories are kept
low. Gaming designs all of the major assemblies that are incorporated into the
final machine configuration.
Competition. The market for gaming machines in North America is dominated by a
single competitor, International Game Technology, Inc. ("IGT"). Management
believes based on industry estimates made by analysts that Bally Gaming has the
second largest market share in North America. There are a number of other well
established, well-financed and well-known companies producing machines that
compete with each of Gaming's lines in each of Gaming's markets. The other major
competitors are Universal Distributing of Nevada, Inc., Video Lottery
Technologies, Inc., Sigma Games, Inc., WMS Industries, Inc. ("WMS"), and in the
international and in some instances domestic marketplaces, companies that market
gaming machines under the brand names of Aristocrat, Atronic, Cirsa, and
Novomatic and Sega Enterprises Ltd. Certain companies have developed niche
products such as Anchor Gaming, Mikohn Gaming Corporation, Casino Data Systems
("CDS"), and Shuffle Master, Inc. In addition, other technology-oriented
companies, such as Silicon Gaming, have entered or may enter the gaming machine
business. Competition among gaming product manufacturers, particularly with
respect to sales of gaming machines into new and emerging markets, is based on
competitive customer pricing and financing terms, appeal to the player, quality
of the product and having an extensive distribution and sales network.
Systems
Markets for Systems. Systems' primary markets for its computerized monitoring
systems are the United States and, to a lesser extent, Canada, New Zealand,
Latin America, Europe and the Caribbean. Markets for Systems within the United
States include traditional land-based casinos predominantly in Nevada and
Atlantic City, New Jersey, Native American casinos and riverboats and dockside
casinos. Domestically, the market for computerized monitoring systems is divided
equally between selling to new installations and to existing customers who are
either expanding their casino floors or are upgrading their hardware to a new
product release. Unlike the United States, where most jurisdictions require the
implementation of systems, there have been few international markets to do so.
Management believes, however, that the international market for such systems is
increasing, and that Systems' sales to such markets will increase accordingly.
Products. Bally Systems designs, integrates, and sells a computerized monitoring
system ("SDS 6000") for slot and video gaming machines which provide casino
operators with on-line real time data relative to a machine's accounting,
security and cash monitoring functions. The SDS 6000 also provides data to, and
receives data from, other third party player tracking computer and software
applications allowing casinos to track their players to establish and compile
individual player profitability and other demographic information. SDS 6000 is
comprised primarily of (1) hardware consisting of microcontroller-based printed
circuit boards which are installed within the slot and video machines as well as
card reader displays and keypads which provide casinos with the ability to track
player gaming activity and to monitor access to slot and video machines by the
casino's employees, (2) application software developed by Systems which provides
access to the slot machine's activity data gathered by the microcontroller
hardware, and (3) third party mini-computers on which the application software
resides. Systems also provides software and hardware support services, including
maintenance, repair and training for purchasers of its monitoring systems.
Product Development. Systems' product development is divided into two areas,
hardware and software. The major areas of hardware development include
microcontroller circuit board design and programming as well as user interface
devices such as card readers, keypads and displays. Hardware development efforts
are focused upon achieving greater functionality, product reliability and ease
of maintenance for the casino operator and achieving greater visual appeal and
ease of use for the slot customer. Development cycles for hardware can vary
between a few months for minor revisions to more than a year for major design
changes or for changes made by various slot manufacturers with which Systems'
product must communicate and be physically integrated. Software development
results in (1) periodic product releases that include new features which extend
and enhance the SDS 6000 product, (2) periodic maintenance releases
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ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
which enable casino operators to correct problems or improve the usability of
the system and (3) documentation needed to install and use the system.
In 1995, the hardware and software groups from Systems, as well as engineers
from Gaming, coordinated efforts to develop a form of cashless wagering that
uses bar-coded coupons which can be read by the bill validators in Gaming's slot
machines which are connected to an SDS 6000 system. Testing and regulatory
approval is being pursued by Bally Systems in anticipation of release to casino
operators. Gaming and Systems development groups continue to direct development
efforts towards other forms of cashless wagering for use on Bally Gaming's slot
machines and the SDS 6000 system.
Systems spent $1.7 million and $1.9 million during the years ended December 31,
1994 and 1995, respectively, and spent $1.1 million during the six months ended
June 30, 1996 and $2.7 million during the year ended June 30, 1997, on product
research and development.
Sales and Marketing. Systems has a direct sales force which produces the
majority of its sales. Gaming's sales force and Gaming's independent distributor
network produce the balance of Systems' sales, primarily in situations where
customers are making gaming machine and computerized monitoring system purchase
decisions at the same time. At June 30, 1997, worldwide, Systems has over 79,000
game monitoring units installed, or in the process of being installed, of which
approximately 69,000 are in the United States. At June 30, 1997, Systems had 79
installed locations. During calendar years 1994 and 1995, Systems' own sales
force has generated approximately 78% of its sales. During the six months ended
June 30, 1996 and the year ended June 30, 1997, Systems' own sales force
generated approximately 93% and 92% of its sales, respectively.
Systems offers its customers the option of signing separate hardware and
software maintenance agreements at the time of sale. These agreements are for
periods of one year and automatically renew unless otherwise canceled in writing
by the customer or Systems. After an initial warranty period, typically 90 days,
the customer is invoiced a monthly hardware and software maintenance fee which
provides essentially for repair and/or replacement of malfunctioning hardware
and software, software version upgrades, and on-call support for software.
Systems offers limited financing terms, normally less than one year, for sales
to new installations. Most sales, however, are invoiced on a net 30 day basis.
Customers. The demand for computerized slot monitoring systems is driven by
regulatory requirements in a given jurisdiction and/or by a casino operator's
competitive need to properly track machine and player activity and establish and
compile individual machine and player profitability and other demographic
information, all of which is of particular importance to casinos in developing
marketing strategies. Systems' revenues are derived approximately equally from
selling to new installations and to existing customers who are either expanding
their casino floors or upgrading their hardware to a new product release. For
the year ended December 31, 1995, the six months ended June 30, 1996 and the
year ended June 30, 1997, Systems' ten largest customers (which include certain
multi-site casino operators that have corporate agreements with Systems)
accounted for approximately 92%, 84% and 70% of Systems' revenues, respectively.
Due to the high initial costs of installing a computerized monitoring system,
customers for such systems generally have tended not to change suppliers once
they have installed such a system. Future growth will be based on penetration of
the international markets, further expansion in the established and emerging
markets, as well as continued development efforts by Systems to provide
customers with new and innovative hardware and software product offerings.
Competition. Systems' main competition currently consists of IGT, CDS, and to a
lesser extent Gaming Systems International, Mikohn Gaming Corporation and Acres
Gaming. Competition is keen in this market due to the number of providers and
the limited number of casinos and jurisdictions in which they operate. Pricing,
product feature and function, accuracy, and reliability are all key factors in
determining a provider's success in selling its system. Systems
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ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
believes the future success of its operations will be determined by its ability
to bring new and innovative products to the market while maintaining its base of
loyal existing customers.
WALL MACHINES AND AMUSEMENT GAMES
Industry Overview
Management believes that the German wall machine market consists of
approximately 220,000 wall machine units. In addition, management believes there
are 50,000 token machine units in Germany. German regulations limit the useful
life of wall machines to a period of four years. As a result, annual market
demand for wall machines in Germany approximates 55,000 units with fluctuations
resulting primarily from economic conditions, and regulatory changes and new
product development. Effective January 1, 1996, a regulatory change took effect
requiring all arcade operators to have at least 15 square meters of space for
each wall machine and a maximum of 10 machines per arcade. Starting in mid-1995,
arcade operators began removing wall machines from their arcades to meet the
requirements of this new regulation. Despite this adverse impact, the demand for
new wall machines was approximately 47,000 units in calendar 1995. All wall
machines manufactured since 1992 have meters that monitor the amount inserted by
players and paid out by the machine. Wall machines without meters were required
to be removed from service by the end of 1996. This led to an increase in demand
for metered wall machines in the quarter ending December 31, 1996 which carried
through the quarter ended March 31, 1997.
Wall machine sales into the arcade market account for approximately 30% of the
total wall machine sales in Germany. A significant number of arcades
(approximately 10%) are owned by the two largest competitors, Gauselmann AG and
NSM AG. Generally these competitors do not purchase wall machines from Bally
Wulff for their arcades. Management believes Bally Wulff's share of the German
wall machine market was approximately 25% for each of the last three years ended
December 31, 1996, and was 33% for the year ended June 30, 1997. The German
legislative authorities regulate and monitor the wall machine industry on an
ongoing basis to ensure conformance with certain manufacturing standards and the
fairness of each machine to users. Legislation presently affecting the wall
machine industry relates to prescribed licensing procedures, the use,
installation and operation of wall machines and the taxation of wall machines.
Operations of Bally Wulff
Products. Bally Wulff's manufacturing operations were founded in Berlin in 1950
and sold to BGII's former parent company in 1972. Bally Wulff produces and
distributes a variety of models of wall machines, under the trade name "Bally
Wulff" for operation in arcades, hotels, restaurants and taverns primarily in
Germany. These wall machines are coin-operated, armless gaming devices similar
to slot machines that award winnings for matching numbers or symbols on three to
five wheels or drums and differ primarily in appearance, graphic design, theme,
pay-table and customer appeal. Each game costs up to 40 pfennigs (approximately
$0.23 at the exchange rate of $1.00=DM 1.75 prevailing as of June 30, 1997,
which rate is used hereinafter) to play, although the player may deposit larger
amounts to provide continuous play but not to increase payoffs. German
regulations limit the maximum payout to ten times the player's stake (DM 4.00 or
approximately $2.30 per game). Current models of wall machines provide the
player the opportunity to win 100 special games on one play, which increases the
potential amount that can be won on the minimum coin drop. German regulations
require a minimum payback of 60% for wall machines, although many machines are
generally programmed to pay back at somewhat higher rates to encourage play.
Bally Wulff has also manufactured token machines for operation in arcades,
hotels, restaurants and taverns in Germany and may continue to do so in the
future on a selective basis.
In addition to manufacturing wall machines, Bally Wulff distributes wall
machines and other recreational and amusement coin-operated machines
manufactured by third parties to provide a more extensive line of products to
its
9
<PAGE> 10
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
customers. These machines include pool tables, dart games, pinball machines,
jukeboxes and arcade games, and are distributed primarily for use in arcades,
restaurants, hotels and taverns.
The following table sets forth the percentage of Bally Wulff's revenues by
product line for the periods indicated:
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
Years ended Six months Year ended
December 31, ended June 30, June 30,
1994 1995 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Wall machines manufactured by Wulff 48% 39% 42% 52%
Recreational and amusement machines and
third party wall machines distributed 21 23 22 25
Other (primarily used machines,
parts and service) 31 38 36 23
--- --- --- ---
100% 100% 100% 100%
=== === === ===
</TABLE>
Product Development. Management believes that Bally Wulff's wall machines are
viewed as premium products because of their quality, dependability, ease of
service and proven ability to attract players and generate revenue. Bally Wulff
designs its machines to appeal to each of the three categories of participants
in the distribution process: Bally Wulff's sales representatives and independent
distributors, the owner/operators of the machines, and the players. The sales
representatives and distributors require machines with broad appeal that are
easy to demonstrate and sell. The owner/operators desire reasonably priced
machines that are easy to collect from and service and that are proven revenue
generators. The players prefer entertaining machines that are simple to play and
have unique features.
Bally Wulff's management has formed design teams which are responsible for
generating ideas for creative new machines. These teams are comprised of
representatives of each department involved in the production and distribution
of machines, such as art design, engineering, manufacturing, marketing and
sales. The design teams meet for three days each calendar quarter at a site away
from Bally Wulff's headquarters. The teams analyze machines currently being
marketed by Bally Wulff and its competitors to assess their strengths and
weaknesses and then suggest ideas for new machines. These ideas are reviewed to
determine which machines should be produced on a trial basis. Bally Wulff
typically pursues 15 to 20 projects at any given time, and approximately 12 to
15 machines are submitted for licensing each year. These new machines are built
in limited quantities and then test marketed for three to six months. Generally,
less than one-half of the new machines tested are put into full scale
production. Management believes this process of generating new ideas and then
turning only a limited number of the ideas into machines which will reach the
mass market is responsible for the high quality of Bally Wulff's machines and
their continued acceptance and success in the marketplace. Because the machines
have a reputation for quality, Bally Wulff is often able to produce and market a
particular model for up to two years, which management believes, based upon its
experience in the relevant marketplace and feedback from customers, exceeds the
industry average.
During the years ended December 31, 1994 and 1995, the six months ended June 30,
1996 and the year ended June 30, 1997, Bally Wulff spent approximately $3.5
million, $3.6 million, $1.8 million and $3.3 million, respectively, on product
research and development.
Sales and Marketing. Bally Wulff sells approximately 83% of its products through
its own sales force of 56 people located in its 23 regional sales offices.
Independent German distributors account for approximately 17% of sales.
Approximately 98% of Wulff's sales of new wall machines are in the German
market. The sales offices are operated as independent profit centers and are
assigned geographic areas for which they are responsible for sales, servicing
the machines and assisting in collecting customers' accounts receivable
balances.
10
<PAGE> 11
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
Bally Wulff devotes substantial time, money and effort to marketing and
promoting its products. Bally Wulff takes an active part in the annual Amusement
Game Fair which is traditionally held each January in Frankfurt, Germany, at
which Bally Wulff introduces new products. The next Amusement Game Fair will be
held in November 1998 rather than January 1998.
The wall machines manufactured and sold by Bally Wulff generally sell for prices
ranging from DM 5,700 to DM 7,700 (approximately $3,300 to $4,400). A majority
of machines distributed by Bally Wulff are paid for in full within 90 days after
the sale. Remaining sales of machines are financed by Bally Wulff generally over
a 12-month period, with interest rates of up to 12%. For this reason, Bally
Wulff establishes an internal credit rating and credit limit for each customer.
Under Bally Wulff's conditions of sale, title to a machine is retained by Bally
Wulff until the machine has been paid for in full. In addition, Bally Wulff
demands security. Currently, Bally Wulff provides customer financing for
approximately 10% of its sales, and management expects this practice to increase
during the latter half of 1997. Leasing machines to customers accounted for 6%
of total revenues for the year ended June 30, 1997 compared to 2%, 3% and 4%
during the years ended December 31, 1994, and 1995 and the six months ended June
30, 1996, respectively. The leasing market is the fastest growing revenue
segment and the management expects a substantial increase for the months ahead.
In approximately 75% of its sales, Bally Wulff accepts wall machines and/or
other recreational and amusement equipment as trade-ins toward the purchase of
new machines. To the extent possible, the used machines are then resold.
Customers. Each of Bally Wulff's top ten customers in 1997 has maintained its
relationship with Bally Wulff for over three years. For the year ended June 30,
1997, no single customer accounted for more than 3% of Bally Wulff's revenues,
while Bally Wulff's top ten largest customers accounted for approximately 12% of
Bally Wulff's revenues. For the year ended December 31, 1995 and the six months
ended June 30, 1996, Bally Wulff's top ten customers accounted for approximately
10% and 15% of Bally Wulff's revenues, respectively, while no single customer
accounted for more than 3% and 6% of Bally Wulff's revenues for such periods,
respectively.
Bally Wulff's customer base for wall machines may be divided into two categories
which differ based on the preferences of their clientele. Operators who place
wall machines in arcades are generally interested in purchasing the newest
products in the hopes that an innovation will result in a high level of public
demand to play the new "hot" product. Street location operators serving hotels,
restaurants and taverns, on the other hand, are generally more inclined to
purchase lower-priced existing models with proven earnings records to provide as
an amenity to customers.
Assembly Operations. Bally Wulff's manufacturing process is primarily an
assembly operation. Its manufacturing facility consists of a four-story,
100,000-square foot building in Berlin, Germany. Bally Wulff purchases its key
raw materials, sub-assemblies and fabricated parts from a variety of suppliers,
and most parts are purchased from multiple suppliers. While there exist no
formal long-term contract commitments to any single supplier, Bally Wulff has
placed certain standing orders with suppliers to help assure the availability of
specific quantities on an as-needed basis. These orders are cancelable by Bally
Wulff at any time without penalty. Most of the component parts are standard on
all models of all Bally Wulff's wall machines, which promotes easy conversion
from the production of one model to another in response to customer demand.
Except in connection with certain promotions, Bally Wulff generally maintains
low inventory levels of assembly parts, and the amount of work-in-process is
generally less than the number of machines sold in one week.
Because of its manufacturing structure, Bally Wulff is capable of substantially
increasing its wall machine output without significant capital expenditures.
Bally Wulff continues to improve its manufacturing efficiency and productivity
through the use of computer-aided design systems, automated production equipment
and devotion of substantial resources to product quality control.
Competition. Germany's wall machine manufacturing industry is dominated by Bally
Wulff and two of its competitors, NSM, AG and Gauselmann, AG. Management
believes these three entities collectively account for more than 90% of
11
<PAGE> 12
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
the entire market. Bally Wulff competes with many companies in the distribution
of coin-operated amusement games, some of which are larger and have greater
resources than Bally Wulff. Bally Wulff's two major competitors own and operate
a significant number of arcades, which may give them a competitive advantage
arising from a built-in market for their games and the ability to test market
new games in their own arcades. Further, increased foreign competition in
Germany may have an adverse impact on the Company's future wall machine
revenues. Management believes that the primary competitive factors in the wall
machine coin-operated amusement game market are the quality and depth of the
product line, price and customer service which includes the ability to fill
orders quickly and efficiently.
ROUTE OPERATIONS
Nevada Operations
Overview. The Company's Nevada route operations involve the selection,
ownership, installation, operation and maintenance of video poker devices,
reel-type slot machines and other electronic gaming machines in local
establishments such as taverns, restaurants, supermarkets, drug stores and
convenience stores operated by third parties ("local establishments"). The
Company's route operations target local residents who generally frequent local
establishments close to their homes.
The following table sets forth certain historical data concerning the Company's
Nevada Route Operations for the years ended June 30:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Average number of gaming machines 5,260 5,290 5,660
owned
Average number of locations 514 524 562
Average win per day per gaming machine $47.70 $48.60 $52.40
</TABLE>
In July 1997 the Company added to its Nevada route through the addition of
contracts with the Scolari's supermarket chain, the Westronics route, and
several smaller locations, which added a total of approximately 650 games,
bringing the total games on the Nevada route to over 6,300 for the first time.
The Company enters into long-term agreements with local establishments through
either space leases or revenue-sharing arrangements. Under revenue sharing
arrangements, most common with taverns, restaurants and convenience stores, the
Company does not pay rent, but rather receives a percentage of the revenues from
the gaming machines. Under revenue sharing arrangements, both the owner of the
local establishment and the Company must have a gaming license. Under space
lease arrangements, most common with supermarkets and drug stores, the Company
pays a fixed rental to the owner of the local establishment and the Company
receives all of the revenues derived from the gaming machines. Under space lease
arrangements, only the Company (and not the establishment owner) is required to
hold a gaming license. Most of the local establishments serviced by the Company
are restricted by law to operating no more than 15 gaming machines.
Revenue-sharing arrangements accounted for approximately 86%, 85%, and 85% of
revenues and 78%, 77%, and 77% of installed machines, respectively, in the
Company's Nevada route operations for the years ended June 30, 1995, 1996, and
1997. At June 30, 1997, the weighted average remaining term of the Company's
revenue sharing arrangements was approximately 3.4 years. Space lease
arrangements accounted for approximately 14%, 15%, and 15% of revenues and 22%,
23%, and 23% of installed machines, respectively, in the Company's Nevada route
operations for the years ended June 30, 1995, 1996, and 1997. At June 30, 1997,
the weighted average remaining term of the Company's space leases was 2.7 years.
The Company has historically been able to renew or replace revenues from
expiring agreements with revenues generated by renewal or replacement contracts.
The Company has emphasized return on investment rather than increasing market
share in renewing or entering into new contracts and has undertaken a systematic
review process to
12
<PAGE> 13
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
adjust its contract mix to emphasize higher margin contracts and, where
permissible, canceling or not renewing unprofitable contracts.
Sales and Marketing. As the largest route operator in Nevada, the Company
believes that it is able to differentiate itself from its competitors through a
full-service operation providing its customers marketing assistance and
promotional allowances and using its advanced design capabilities to provide
electronic gaming machines with features customized to customers' needs. The
Company has developed and is currently implementing a new system called
"Gamblers Bonus". Gamblers Bonus is designed as a cardless slot players' club
and player tracking system, which allows multiple local establishments to be
linked together into a distributed gaming environment. Through this technology,
the Company is able to provide its players and customers with many of the same
gaming choices otherwise available only in a larger scale casino environment
such as multi-location progressive jackpots, bigger jackpot payouts and
traditional players' club enhancements. Additionally, the Company is offering a
series of new and unique games available only to members of the Gamblers Bonus.
Since launching Gamblers Bonus, the gaming machines linked to Gamblers Bonus
have experienced an increase in net win per day per machine. As of June 30,
1997, the Company had the Gamblers Bonus system installed in 130 locations
representing approximately 1,500 gaming machines. The Company believes Gamblers
Bonus will continue to improve both the revenues and operating efficiencies of
its Nevada route operations and has the potential to create additional
opportunities in the Route Operations segment of the gaming industry.
Additionally, the Company has been updating its installed base of gaming
machines with bill-acceptor equipped electronic gaming machines which are also
expected to improve revenues and operating efficiencies.
Customers. The Company believes it has a diversified customer base with no one
customer accounting for more than 10% and 6% of the Company's revenues generated
from Nevada route operations during the years ended June 30, 1996 and 1997,
although approximately 14% and 13% of such revenues were generated through an
affiliated group of such customers for such periods, respectively. The
affiliated group consists of eight partnerships each having one individual
partner who is common to all such partnerships. For the years ended June 30,
1996 and 1997, the ten largest customers accounted for approximately 26% and 23%
of Nevada route operations revenues, respectively.
Assembly Operations. In previous years, the Company manufactured electronic
gaming machines for use in the Nevada route operations. The Company manufactured
approximately 73% of the electronic gaming machines currently used in the Nevada
route operations. The Company is currently using a third party to perform
assembly operations of the electronic gaming machines used in the Nevada route
operations. The Company will soon combine this operation with Gaming's assembly
operation.
Competition. The Company is subject to substantial direct competition for its
revenue-sharing and space lease locations from several large route operators and
numerous small operators, located principally in Las Vegas, Reno and the
surrounding areas. The Company and Jackpot Enterprises, Inc. are the dominant
route operators in Nevada. The principal method of competition for route
operators includes the economic terms of the revenue sharing or space lease
arrangement, the services provided and the reputation of the route operator.
Price competition is intense and until 1997 had reduced the Company's gross
margin on such operations as the percentage of the gaming machine revenues
retained by local establishment owners had increased.
Louisiana Operations
Overview. On the basis of its Nevada route operations expertise, in March 1992
the Company obtained a contract to operate video poker gaming machines in the
greater New Orleans, Louisiana area through a subsidiary, Video Services, Inc.
("VSI"). The Company entered into an operating agreement which runs through May
2002 (with a five-year renewal option under certain conditions) with Fair
Grounds Corporation, Jefferson Downs Corporation and Finish Line Management
Corporation (collectively, "Fair Grounds") for the Company to be the exclusive
13
<PAGE> 14
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
operator of video poker machines at the only racetrack and ten associated
off-track betting parlors (OTB's) in the greater New Orleans area. The Company
operates the game rooms where the video poker machines are located, for each of
the eleven facilities owned by Fair Grounds, for which it receives a percentage
of the revenue generated by the machines. As of June 30, 1997 the Company had
approximately 700 video poker machines in Louisiana.
Under the Louisiana gaming laws and regulations, the majority stockholder of any
entity operating video poker machines in Louisiana must be a domiciled resident
of the State of Louisiana. As a result, the Company owns 49% of the capital
stock of VSI and three prominent members of the Louisiana business and legal
community own the remaining 51%. The Company, however, owns all the voting stock
of VSI and the majority of its officers and directors are Company employees. The
Company has a 71% interest in dividends of VSI in the event dividends are
declared. The Company also formed two other Louisiana subsidiaries, Southern
Video Services, Inc. ("SVS") and Video Distributing Services, Inc. ("VDSI").
Both SVS and VDSI are structured in a manner similar to VSI except that the
Company is entitled to receive 60% of any SVS dividends. Under the terms of its
contract with Fair Grounds, the Company must conduct any additional video poker
operations in Louisiana other than gaming at racetracks or OTB parlors through
SVS. To date, SVS and VDSI have not engaged in business in Louisiana.
The Company is prohibited by the Louisiana Act from engaging in both the
manufacture and operation of video poker gaming in Louisiana and, therefore, the
Company does not manufacture its own video poker machines for use in Louisiana.
On November 5, 1996 voters in Louisiana approved a proposition to allow video
poker to continue in six of the seven parishes in which the Company operates
OTB's in the greater New Orleans area. In addition, voters approved video poker
in three parishes in the greater New Orleans area where the Company currently
does not operate. In the one parish in which the Company operates where video
poker was voted down, the Company will be allowed to continue to conduct
business through June 30, 1999. The two OTB's in this parish accounted for $2.2
million of revenues and approximately 10% of operating income for VSI during the
year ended June 30, 1997.
Sales and Marketing. VSI has developed an extensive marketing program under the
names "The Players Room" and "Rockin' Horse Lounge" which are designed to
attract primarily local residents to its facilities. Media placement has focused
on newspaper and radio advertising with promotions including a player's club,
direct mailings and offerings of a wide range of prizes.
The Company intends to selectively expand its operations in the greater New
Orleans area by increasing the number of video poker machines in certain of its
existing locations as demand warrants, as well as investigating the addition of
new locations under its current contract with the Fair Grounds in areas where
competitive factors are favorable. Under the Louisiana Act, racetracks and OTBs
are permitted to install an unlimited number of video poker machines while
truckstops and taverns may install only limited numbers of such machines.
Competition. The Company is subject to extensive competition for contracts to
operate video poker machines and the Company's racetrack and OTB parlors compete
with various riverboats and truckstops and locations with liquor licenses
throughout the New Orleans area. Each truckstop is permitted to operate up to 50
video poker machines and each tavern is permitted to operate up to three video
poker machines. Louisiana has riverboat gaming statewide and four riverboats are
currently operating in Orleans Parish. Riverboats are permitted to have live
table games and an unlimited number of gaming machines, including slot machines.
Louisiana has also authorized one land-based casino, permitted to include live
table games and an unlimited number of gaming machines in New Orleans, which
opened in May 1995; however, its operator filed for bankruptcy reorganization
and ceased operations in November 1995. At present it is not known whether the
land-based casino will reopen following reorganization.
CASINO OPERATIONS
Overview.
14
<PAGE> 15
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
Rainbow Casino. On July 16, 1994, the Rainbow Casino located in Vicksburg,
Mississippi permanently opened for business. The project includes the Rainbow
Casino, which is a 24,000-square foot casino owned and operated by the Company
which as of June 30, 1997, operated approximately 700 gaming machines and 21
table games as well as a 245-seat restaurant. The facility also includes an
89-room Days Inn hotel and a 10-acre indoor and outdoor entertainment complex
called Funtricity Entertainment Park, which was developed by a subsidiary of Six
Flags Corporation. Both the hotel and entertainment park, which were
substantially completed in late May 1995, are owned and operated by third
parties. The property is the only destination of its kind in Mississippi
containing a casino/hotel/family entertainment complex. Rainbow Casino draws its
customers principally from within a 75-mile radius of Vicksburg. The Vicksburg
casino market generated approximately $185.0 million in gaming revenue in the
twelve months ended June 30, 1997.
The Company is the general partner of the partnership ("RCVP") that owns the
Rainbow Casino. Pursuant to transactions consummated in March 1995, Rainbow
Casino Corporation, the former owner of 55% of the Rainbow Casino, is now a
limited partner entitled to receive 10% of the net available cash flows after
debt service and other items, as defined (which amount increases to 20% of such
amount when revenues exceed $35.0 million but only on such incremental amount),
for a period of 15 years, such period being subject to one year extensions for
each year in which a minimum payment of $50,000 is not made. The Company holds
the remaining economic interest in the partnership. As part of the refinancing
completed in August 1997, the Company purchased the HFS and NGM notes and
repurchased the casino royalty from HFS.
Rail City Casino. In April 1990, the Company purchased, for an aggregate
purchase price of $9.5 million, substantially all of the assets of the Rail City
Casino (formerly the Plantation Station Casino) located near the border of the
cities of Reno and Sparks in northern Nevada. Rail City is a 20,000 square-foot
casino which as of June 30, 1997 operated approximately 400 gaming machines, 9
table games, including blackjack, craps, roulette and poker, and keno. In
addition, Rail City Casino includes a 300-seat restaurant and offers a race and
sports book which is leased to an independent race and sports book operator.
Rail City Casino is convenient to both Reno and Sparks and caters to the local
market.
Sales and Marketing. The Company's casinos target the mid-level gaming customers
inthe market. The Company promotes its casinos primarily through special
promotional events and by providing quality food at reasonable prices.
Competition. Gaming of all types is available throughout Nevada and Mississippi
in numerous locations, including many locations which may compete directly or
indirectly with the Company's casino operations. The operation of casinos is a
highly competitive business. The principal competitive factors in the industry
include the quality and location of the facility, the nature and quality of the
amenities and customer services offered and the implementation and success of
marketing programs. Many of Rail City Casino's competitors include large
casino-hotels which offer more amenities and may be perceived to have more
favorable locations than the Company. The Rainbow Casino is the fourth gaming
facility to open in Vicksburg and as such faces substantial direct competition
for gaming customers in the region. In August 1997 it was announced the Lady
Luck Gaming Corporation and Horseshoe Gaming, LLC formed a joint venture to
develop a project that would include a dockside casino, hotel and related
amenities. The project is contingent on several factors including regulatory
approval and financing.
PATENTS, COPYRIGHTS AND TRADE SECRETS
Gaming has copyrighted both the source code and the video presentation of its
games and registered many of these copyrights with the U.S. Copyright Office
under the Copyright Act of 1976. Game version upgrades and new games are
currently in the process of United States patent and copyright registration.
Such copyrights expire at various dates from September 2056 to October 2065. In
addition, some of the games have Federal and/or state
15
<PAGE> 16
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
trademarks registered with the U.S. Patent and Trademark Office. Some of the
games (either currently used or reserved for future development) also are
covered by patents filed with the U.S. Patent and Trademark Office. Such patents
expire at various dates from May 2008 to March 2012.
Gaming Equipment and Systems are obligated under several patent agreements to
pay royalties ranging from approximately $50 to $200 per game depending on the
components in the gaming machines. Additionally, based on an amendment to the
trademark licensing agreement between the Company and Bally Entertainment
Corporation ("BEC") dated May 10, 1996, Gaming is obligated to pay a royalty on
new machines sold of $35 per machine beginning on June 18, 1996 with a minimum
annual royalty payment of $1.0 million for the initial five-year term of the
amended agreement, which is subject to annual renewals by the Company
thereafter. Royalty expense for Gaming for the years ended December 31, 1994 and
1995, the six months ended June 30, 1996 and the year ended June 30, 1997 was
$2.9 million, $3.0 million, $1.1 million and $3.0 million, respectively.
In connection with a settlement agreement entered between BEC, Bally Gaming,
Inc., BGI Enterprises, BGII and IGT on December 16, 1992, BGII sold its interest
in the Casino Interlink Multiple Location Progressive System (the "Progressive
System") to IGT. The Company reserved certain rights in the sale, including the
rights to continue to market the Progressive System (i) within Europe, (ii) for
use in single locations and (iii) worldwide in lottery applications. The
prohibition on sales or distribution of the Progressive System expires on
December 16, 1997. This agreement is binding on all successors and assigns of
the Company.
The Company has registered the trademark "CEI" and its design and the logos of
United Gaming, Inc. and United Coin Machine Co. with the U.S. Patent and
Trademark Office.
EMPLOYEES AND LABOR RELATIONS
As of June 30, 1997, the Company employed approximately 1,200 persons in the
State of Nevada, VSI employed 70 persons in the State of Louisiana, RCVP
employed 450 persons in the State of Mississippi, the Company employed
approximately 40 persons in various other states and Bally Wulff employed 450
persons in Germany. None of such employees is covered by a collective bargaining
agreement. Bally Wulff's employees, however, are covered by German regulations
which apply industry-wide and are developed, to some extent, through
negotiations between representatives of the metal working industry employers and
the trade union representing the employees. These regulations are in the nature
of collective bargaining agreements and cover the general terms and conditions
of such items as wages, vacations and work hours. The regulations codify what
are considered the common standards of employment in the German metal working
industry. The Company believes its relationships with its employees are
satisfactory.
GAMING REGULATIONS AND LICENSING
General. The manufacture and distribution of gaming machines and the operation
of gaming facilities are subject to extensive Federal, state, local and foreign
regulation. Although the laws and regulations of the various jurisdictions in
which the Company operates and into which the Company may expand its gaming
operations vary in their technical requirements and are subject to amendment
from time to time, virtually all of these jurisdictions require licenses,
permits, documentation of qualification, including evidence of financial
stability, and other forms of approval for companies engaged in the manufacture
and distribution of gaming machines and the operation of gaming facilities, as
well as for the officers, directors, major stockholders and key personnel of
such companies.
Any person which acquires a controlling interest in the Company would have to
meet the requirements of all governmental bodies which regulate the Company's
gaming business. A change in the make-up of the Company's Board of Directors and
management would require the various Gaming Authorities to examine the
qualifications of the new board and management.
16
<PAGE> 17
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
Nevada. The ownership and operation of casino gaming facilities in Nevada are
subject to (i) the Nevada Gaming Control Act and the regulations promulgated
thereunder (the "Nevada Act") and (ii) various local ordinances and regulations.
The Company's gaming, manufacturing, distributing and slot route operations
(herein referred to as "gaming machine operations") are subject to the licensing
and regulatory control of the Nevada State Gaming Control Board (the "Nevada
Board"), the Nevada Gaming Commission (the "Nevada Commission"), the County
Liquor and Gaming Licensing Board (the "Clark County Board") and various other
county and city regulatory agencies, all of which are collectively referred to
as the "Nevada Gaming Authorities".
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things; (i) the prevention of unsavory or unsuitable persons
from having any direct or indirect involvement with gaming at any time in any
capacity; (ii) the strict regulation of all persons, locations, practices,
associations and activities related to the operation of licensed gaming
establishments and the manufacture and distribution of gaming machines, cashless
wagering systems and associated equipment; (iii) the establishment and
maintenance of responsible accounting practices and procedures; (iv) the
maintenance of effective control over the financial practices of licensees,
including establishment of minimum procedures for internal fiscal affairs and
the safeguarding of assets and revenues, providing reliable record keeping and
requiring the filing of periodic reports with the Nevada Gaming Authorities; (v)
the prevention of cheating and fraudulent practices; and (vi) providing a source
of state and local revenues through taxation and licensing fees. Change in such
laws, regulations and procedures could have an adverse effect on the
gaming-related operations conducted by the Company.
The Company is registered with the Nevada Commission as a publicly traded
corporation (a "Registered Corporation"). The Company's direct and indirect
subsidiaries which conduct gaming operations at various locations, conduct
gaming machine operations and manufacture and distribute gaming devices
(collectively, the "Nevada Subsidiaries") are required to be licensed by the
Nevada Gaming Authorities. The licenses held by the Nevada Subsidiaries require
the periodic payments of fees, or fees and taxes, and are not transferable. The
Company, through registered intermediary companies (individually, an
"Intermediary Company" and collectively, the "Intermediary Companies"), has been
found suitable to own the stock of the Nevada Subsidiaries, each of which is a
corporate licensee (individually, a "Corporate Licensee" and collectively, the
"Corporate Licensees") under the terms of the Nevada Act. As a Registered
Corporation, the Company is required periodically to submit detailed financial
and operating reports to the Nevada Commission and furnish any other information
which the Nevada Commission may require. No person may become a stockholder of,
or receive any percentage of the profits from the Corporate Licensees without
first obtaining licenses and approvals from the Nevada Gaming Authorities. The
Company, the Intermediary Companies and the Corporate Licensees have obtained
from the Nevada Gaming Authorities the various registrations, findings of
suitability, approvals, permits and licenses required in order to engage in
gaming activities, gaming machine operations, and in the manufacture and
distribution of gaming devices for use or play in Nevada or for distribution
outside of Nevada.
All gaming machines and cashless wagering systems that are manufactured, sold or
distributed for use or play in Nevada, or for distribution outside of Nevada,
must be manufactured by licensed manufacturers and distributed or sold by
licensed distributors. All gaming machines manufactured for use or play in
Nevada must be approved by the Nevada Commission before distribution or exposure
for play. The approval process for gaming machines and cashless wagering systems
includes rigorous testing by the Nevada Board, a field trial and a determination
as to whether the gaming machines or cashless wagering system meets strict
technical standards that are set forth in the regulations of the Nevada
Commission. Associated equipment (as defined in the Nevada Act) must be
administratively approved by the Chairman of the Nevada Board before it is
distributed for use in Nevada.
The Nevada Gaming Authorities may investigate any individual who has a material
relationship to, or material involvement with, the Company, the Intermediary
Companies or the Corporate Licensees in order to determine whether such
individual is suitable or should be licensed as a business associate of a gaming
licensee. Officers, directors and key employees of the Company and the
Intermediary Companies who are actively and directly
17
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ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
involved in the licensed activities of the Corporate Licensees may be required
to be licensed or found suitable by the Nevada Gaming Authorities. The Nevada
Gaming Authorities may deny an application for licensing for any cause which
they deem reasonable. A finding of suitability is comparable to licensing, and
both require submission of detailed personal and financial information followed
by a thorough investigation. The applicant for licensing or a finding of
suitability must pay all the costs of the investigation. Changes in licensed
positions must be reported to the Nevada Gaming Authorities and in addition to
their authority to deny an application for a finding of suitability or
licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a
change in a corporate position.
If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company, the Intermediary Companies or the Corporate
Licensees, the companies involved would have to sever all relationships with
such person. In addition, the Nevada Commission may require the Company, the
Intermediary Companies or the Corporate Licensees to terminate the employment of
any person who refuses to file appropriate applications. Determinations of
suitability or of questions pertaining to licensing are not subject to judicial
review in Nevada.
The Company and the Corporate Licensees that hold nonrestricted licenses are
required to submit detailed financial and operating reports to the Nevada
Commission. A nonrestricted license is a license for an operation consisting of
16 or more slot machines, or a license for any number of slot machines together
with any other game, gaming device, race book or sports pool at one
establishment. Substantially all material loans, leases, sales of securities and
similar financing transactions by the Corporate Licensees that hold a
nonrestricted license must be reported to or approved by the Nevada Commission.
If it were determined that the Nevada Act was violated by a Corporate Licensee,
the licenses it holds could be limited, conditioned, suspended or revoked,
subject to compliance with certain statutory and regulatory procedures. In
addition, the Company, the Intermediary Companies, the Corporate Licensees and
the persons involved could be subject to substantial fines for each separate
violation of the Nevada Act at the discretion of the Nevada Commission. Further,
a supervisor could be appointed by the Nevada Commission to operate any
nonrestricted gaming establishment operated by a Corporate Licensee and, under
certain circumstances, earnings generated during the supervisor's appointment
(except for reasonable rental of the casino) could be forfeited to the State of
Nevada. Limitation, conditioning or suspension of the gaming licenses of the
Corporate Licensees or the appointment of a supervisor could (and revocation of
any gaming license would) materially adversely affect the gaming-related
operations of the Company.
The Gaming Authorities may, at their discretion, require the holder of any
security of the Company, such as the Notes or the New Notes, to file
applications, be investigated, and be found suitable to own such security of the
Company if the Nevada Commission has reason to believe that such ownership would
otherwise be inconsistent with the declared policies of the State of Nevada. The
applicant must pay all costs of investigation incurred by the Nevada Gaming
Authorities in conducting any such investigation.
The Nevada Act requires any person who acquires more than 5% of any class of a
Registered Corporation's voting securities to report the acquisition to the
Nevada Commission. The Nevada Act requires that beneficial owners of more than
10% of any class of a Registered Corporation's voting securities apply to the
Nevada Commission for a finding of suitability within 30 days after the Chairman
of the Nevada Board mails the written notice requiring such filing. In the event
that there is a default in the payment of dividends for six consecutive dividend
payment dates for the Company's 11 1/2% Non-Voting Junior Convertible
Pay-in-Kind Special Stock, Series E (the "Series E Preferred Stock"), it will
qualify as a voting security under the terms of the Nevada Act and will be
considered as a separate class of voting securities for purposes of determining
beneficial ownership. Under certain circumstances, an "institutional investor",
as defined in the Nevada Act, which acquires more than 10%, but not more than
15%, of a class of a Registered Corporation's voting securities may apply to the
Nevada Commission for a waiver of such finding of suitability if such
institutional investor holds the securities for investment purposes only. An
institutional investor shall not be deemed to hold voting securities for
investment purposes unless the voting securities were
18
<PAGE> 19
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
acquired and are held in the ordinary course of business as an institutional
investor and not for the purpose of causing, directly or indirectly, the
election of a majority of the members of the board of directors of the
Registered Corporation, any change in the corporate charter, bylaws, management,
policies or operations of the Registered Corporation, or any of its gaming
affiliates, or any other action which the Nevada Commission finds to be
inconsistent with holding the Registered Corporation's voting securities for
investment purposes only. Activities which are not deemed to be inconsistent
with holding voting securities for investment purposes only include: (i) voting
on all matters voted on by stockholders; (ii) making financial and other
inquiries of management of the type normally made by securities analysts for
informational purposes and not to cause a change in its management, policies or
operations; and (iii) such other activities as the Nevada Commission may
determine to be consistent with such investment intent. If the beneficial holder
of voting securities who must be found suitable is a corporation, partnership or
trust, it must submit detailed business and financial information including a
list of beneficial owners. The applicant is required to pay all costs of
investigation.
Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Nevada Commission or
the Chairman of the Nevada Board may be found unsuitable. The same restrictions
apply to a record owner if the record owner, after request, fails to identify
the beneficial owner. Any stockholder found unsuitable and who holds, directly
or indirectly, any beneficial ownership of the common stock beyond such period
of time as may be prescribed by the Nevada Commission may be guilty of a
criminal offense. The Company is subject to disciplinary action if, after it
receives notice that a person is unsuitable to be a stockholder or to have any
other relationship with the Company, the Intermediary Companies or the Corporate
Licensees, the Company (i) pays that person any dividend or interest upon voting
securities of the Company, (ii) allows that person to exercise, directly or
indirectly, any voting right conferred through securities held by that person,
(iii) pays remuneration in any form to that person for services rendered or
otherwise, or (iv) fails to pursue all lawful efforts to require such unsuitable
person to relinquish his voting securities, including, if necessary, the
immediate purchase of said voting securities for cash at fair market value.
Additionally, the Clark County Board has taken the position that it has the
authority to approve all persons owning or controlling the stock of any
corporation controlling a gaming license.
The Nevada Commission may in its discretion require the holder of any debt
securities of a Registered Corporation to file applications, be investigated and
be found suitable to own the debt security if the Nevada Commission has reason
to believe that such ownership would otherwise be inconsistent with the declared
policies of the State of Nevada. If the Nevada Commission determines that a
person is unsuitable to own such security, then pursuant to the Nevada Act, the
Registered Corporation can be sanctioned, including the loss of its approvals,
if, without the prior approval of the Nevada Commission, it (i) pays the
unsuitable person any dividend, interest or any distribution whatsoever, (ii)
recognizes any voting right by such unsuitable person in connection with such
securities, (iii) pays the unsuitable person renumeration in any form, or (iv)
makes any payment to the unsuitable person by way of principal, redemption,
conversion, exchange, liquidation or similar transaction.
The Company is required to maintain a current stock ledger in Nevada which may
be examined by the Nevada Gaming Authorities at any time. If any securities are
held in trust by an agent or by a nominee, the record holder may be required to
disclose the identity of the beneficial owner to the Nevada Gaming Authorities.
A failure to make such disclosure may be grounds for finding the record holder
unsuitable. The Company is also required to render maximum assistance in
determining the identity of the beneficial owner. The Nevada Commission has the
power to impose a requirement that a Registered Corporation's stock certificates
bear a legend indicating that the securities are subject to the Nevada Act. The
Nevada Commission has imposed this requirement on the Company.
The Company may not make a public offering of its securities without the prior
approval of the Nevada Commission if the securities or proceeds therefrom are
intended to be used to construct, acquire or finance gaming facilities in
Nevada, or to retire or extend obligations incurred for such purposes. In
addition, (i) a Corporate Licensee may not guarantee a security issued by a
Registered Corporation pursuant to a public offering without the prior approval
of the Nevada Commission; and (ii) restrictions on the transfer of an equity
security issued by a
19
<PAGE> 20
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
Corporate Licensee or Intermediary Company and agreements not to encumber such
securities (collectively, "Stock Restrictions") are ineffective without the
prior approval of the Nevada Commission. The Nevada Commission has also imposed
a requirement on the Company that it must receive the prior administrative
approval of the Nevada Board Chairman for any offer for the sale of an equity
security in a private transaction.
Changes in control of the Company through merger, consolidation, stock or asset
acquisitions, management or consulting agreements, or any act or conduct by a
person whereby he obtains control, may not occur without the prior approval of
the Nevada Commission. Entities seeking to acquire control of a Registered
Corporation must satisfy the Nevada Board and Nevada Commission on a variety of
stringent standards prior to assuming control of such Registered Corporation.
The Nevada Commission may also require controlling stockholders, officers,
directors and other persons having a material relationship or involvement with
the entity proposing to acquire control to be investigated and licensed as a
part of the approval process relating to the transaction.
The Nevada legislature has declared that some corporate acquisitions opposed by
management, repurchases of voting securities and corporate defense tactics
affecting Nevada corporate gaming licensees, and Registered Corporations that
are affiliated with those operations, may be injurious to stable and productive
corporate gaming. The Nevada Commission has established a regulatory scheme to
ameliorate the potentially adverse affects of these business practices on
Nevada's gaming industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming licensees and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral environment for orderly governance of corporate
affairs. Approvals are, in certain circumstances, required from the Nevada
Commission before a Registered Corporation can make exceptional repurchases of
voting securities above the current market price thereof and before a corporate
acquisition opposed by management can be consummated. The Nevada Act also
requires prior approval of a plan of recapitalization proposed by the Registered
Corporation's Board of Directors in response to a tender offer made directly to
the Registered Corporation's stockholders for the purposes of acquiring control
of the Registered Corporation.
License fees and taxes, computed in various ways depending on the type of gaming
or activity involved, are payable to the State of Nevada, and to the counties
and cities in which the Licensees' respective operations are conducted.
Depending upon the particular fee or tax involved, these fees and taxes are
payable either monthly, quarterly or annually and are based upon either (i) a
percentage of the gross revenues received, (ii) the number of gaming devices
operated, or (iii) the number of games operated. A casino entertainment tax is
also paid by casino operations where entertainment is furnished in connection
with the selling of food or refreshments. The Corporate Licensees that hold a
license as an operator of a gaming device route or a manufacturer's or
distributor's license also pay certain fees to the State of Nevada.
Any person who is licensed, required to be licensed, registered, required to be
registered, or under common control with such persons (collectively,
"Licensees"), and who proposes to become involved in a gaming venture outside of
Nevada, is required to deposit with the Nevada Board, and thereafter maintain, a
revolving fund in the amount of $10,000 to pay the expenses of investigation by
the Nevada Board of its participation in such foreign gaming. The revolving fund
is subject to increase or decrease in the discretion of the Nevada Commission.
Thereafter, Licensees are required to comply with certain reporting requirements
imposed by the Nevada Act. Licensees are also subject to disciplinary action by
the Nevada Commission if they knowingly violate any laws of the foreign
jurisdiction pertaining to the foreign gaming operation, fail to conduct the
foreign gaming operation in accordance with the standards of honesty and
integrity required of Nevada gaming operations, engage in activities that are
harmful to the State of Nevada or its ability to collect gaming taxes and fees,
or employ a person in the foreign operations who has been denied a license or
finding of suitability in Nevada on the ground of personal unsuitability.
The sale of alcoholic beverages at establishments operated by a Corporate
Licensee is subject to licensing, control and regulation by applicable
regulatory agencies. All licenses are revocable and are not transferable. The
agencies
20
<PAGE> 21
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
involved have full power to limit, condition, suspend or revoke any such
license, and any such disciplinary action could (and revocation would) have a
material adverse affect upon the operations of the Corporate Licensees.
Louisiana. The manufacture, distribution, servicing and operation of video draw
poker devices ("Devices") in Louisiana is subject to the Louisiana Video Draw
Poker Devices Control Law and the Rules and Regulations promulgated thereunder
(the "Louisiana Act"). Until May 1, 1996 licensing and regulatory control was
maintained by the Video Gaming Division of the Gaming Enforcement Section of the
Office of State Police within the Department of Public Safety and Corrections
(the "Division"). The Louisiana legislature passed a bill which created a single
gaming control board for the regulation of gaming in Louisiana. This Board is
called the Louisiana Gaming Control Board (the "Louisiana Board") which oversees
all licensing for all forms of legalized gaming in Louisiana (including gaming
on Native American lands). The Division will continue to perform investigatory
functions for the Louisiana Board. The laws and regulations of Louisiana are
based upon a primary consideration of maintaining the health, welfare and safety
of the general public and upon a policy which is concerned with protecting the
video gaming industry from elements of organized crime, illegal gambling
activities and other harmful elements as well as protecting the public from
illegal and unscrupulous gaming to ensure the fair play of devices.
Each of the indirect operating subsidiaries for the Company's gaming operations
in Louisiana, VSI and SVS, has been granted a license as a device owner by the
Division. The other indirect subsidiary of the Company, VDSI, has been granted a
license as a distributor by the Division. These gaming subsidiaries are
Louisiana Licensees (the "Louisiana Licensees") under the terms of the Louisiana
Act. The licenses held by the Louisiana Licensees expire at midnight on June 30
of each year and must be renewed annually through payment of fees. All license
fees must be paid on or before May 15 in each year licenses are renewable.
The Louisiana Board may deny, impose a condition on or suspend or revoke a
license, renewal or application for a license for violations of any rules and
regulations of the Louisiana Board or any violations of the Louisiana Act. In
addition, fines for violations of gaming laws or regulations may be levied
against the Louisiana Licensees and the persons involved for each violation of
the gaming laws. The issuance, condition, denial, suspension or revocation is
deemed a pure and absolute privilege and is at the discretion of the Louisiana
Board in accordance with the provisions of the Louisiana Act. A license is not
property or a protected interest under the constitution of either the United
States or the State of Louisiana.
The Division has the authority to conduct overt and covert investigations of any
person involved directly or indirectly in the video gaming industry in
Louisiana. These investigations have extended to information regarding a
prospective licensee's and his or her spouse's immediate family and relatives
and their affiliations with certain organizations or other business entities.
The investigation may also extend to any person who has or controls more than a
5% ownership, income or profits interest in an applicant for or holder of a
license or who is a key employee, or who has the ability to exercise significant
influence over the licensee. All persons or entities investigated must meet all
suitability requirements and qualifications for a licensee. The Louisiana Board
may deny an application for licensing for any cause which it may deem
reasonable. The applicant for licensing must pay a filing fee which also covers
the cost of the investigation.
In order for a corporation to be licensed as an operator or distributor of video
poker gaming devices by the Louisiana Board, a majority of the stock of the
corporation must be owned by persons who have been domiciled in Louisiana for a
period of at least two years prior to the date of the application.
In addition to licensure as a manufacturer of devices under the Louisiana Act,
Gaming has been licensed as a manufacturer under the Louisiana Riverboat
Economic Development and Gaming Control Act (the "Louisiana Riverboat Act").
Gaming's application for a permanent manufacturer's license as it relates to the
land-based casino in New Orleans was pending before the Louisiana Economic
Development and Gaming Corporation ("LEDGC") at the time the operator of the
land-based casino filed for bankruptcy reorganization and ceased operations,
resulting in the termination of funding for and effective closure of the LEDGC
regulatory operations. The authority and duties
21
<PAGE> 22
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
of LEDGC regarding licensing and regulation of the land-based casino will now
fall within the jurisdiction of the Louisiana Board. The Louisiana Board has
recently promulgated regulations governing its operation and the Company has
been in contact with representatives of the Louisiana Board to coordinate the
submission of all materials required for the Louisiana Board to issue the
Company such licenses, permits or approvals as may be required.
Mississippi. The manufacture and distribution of gaming and associated equipment
and the ownership and operation of casino facilities in Mississippi are subject
to extensive state and local regulation, primarily the licensing and regulatory
control of the Mississippi Gaming Commission (the "Mississippi Commission") and
the Mississippi State Tax Commission.
The Mississippi Gaming Control Act (the "Mississippi Act"), which legalized
dockside casino gaming in Mississippi, was enacted on June 29, 1990. Although
not identical, the Mississippi Act is similar to the Nevada Gaming Control Act.
The Mississippi Commission has adopted regulations which are also similar in
many respects to the Nevada gaming regulations.
The laws, regulations and supervisory procedures of Mississippi and the
Mississippi Commission seek to: (i) prevent unsavory or unsuitable persons from
having any direct or indirect involvement with gaming at any time or in any
capacity; (ii) establish and maintain responsible accounting practices and
procedures; (iii) maintain effective control over the financial practices of
licensees, including establishing minimum procedures for internal fiscal affairs
and the safeguarding of assets and revenues, providing reliable record keeping
and making periodic reports to the Mississippi Commission; (iv) prevent cheating
and fraudulent practices; (v) provide a source of state and local revenues
through taxation and licensing fees; and (vi) ensure that gaming licensees, to
the extent practicable, employ Mississippi residents. The regulations are
subject to amendment and interpretation by the Mississippi Commission. Changes
in Mississippi law or regulations may limit or otherwise materially affect the
types of gaming that may be conducted and could have an adverse effect on the
Company and the Company's Mississippi gaming operations.
The Mississippi Act provides for legalized dockside gaming at the discretion of
the 14 counties that either border the Gulf Coast or the Mississippi River but
only if the voters in such counties have not voted to prohibit gaming in that
county. As of July 1997, dockside gaming was permissible in nine of the 14
eligible counties in the state and gaming operations had commenced in Adams,
Hancock, Harrison, Tunica, Warren and Washington counties. Under Mississippi
law, gaming vessels must be located on the Mississippi River or on navigable
waters in eligible counties along the Mississippi River, or in the waters of the
State of Mississippi lying south of the state in eligible counties along the
Mississippi Gulf Coast. Litigation is pending with respect to the expansion of
eligible gaming sites in which a landowner and a license applicant have appealed
a finding of suitability by the Mississippi Commission of a site on the Big
Black River in Warren County near Interstate 20 between Jackson and Vicksburg,
Mississippi, where the Rainbow Casino, operated by RCVP, is located. The law
permits unlimited stakes gaming on permanently moored vessels on a 24-hour basis
and does not restrict the percentage of space which may be utilized for gaming.
There are no limitations on the number of gaming licenses which may be issued in
Mississippi.
The Company, RCVP, Gaming and their affiliates are subject to the licensing and
regulatory control of the Mississippi Commission. The Company is registered
under the Mississippi Act as a publicly traded holding company of RCVP and
Gaming is required to periodically submit detailed financial and operating
reports to the Mississippi Commission and furnish any other information which
the Mississippi Commission may require. If the Company is unable to continue to
satisfy the registration requirements of the Mississippi Act, the Company and
its affiliates cannot own or operate gaming facilities or continue to act as a
manufacturer and distributor in Mississippi. RCVP must maintain a gaming license
from the Mississippi Commission to operate a casino in Mississippi and Gaming
must maintain a manufacturer and distributor license from the Mississippi
Commission to manufacture and distribute gaming products. Such licenses are
issued by the Mississippi Commission subject to certain conditions, including
continued compliance with all applicable state laws and regulations.
22
<PAGE> 23
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
Gaming and manufacturer and distributor licenses are not transferable, are
issued for a two-year period and must be renewed periodically thereafter. RCVP
was granted a renewal of its gaming license by the Mississippi Commission in
1996 and such license must be renewed in June 1998. Gaming was granted a renewal
of its manufacturer and distributor license in April 1997 and such license must
be renewed in April 1999. No person may become a stockholder of, or receive any
percentage of profits from, a licensed subsidiary of a holding company without
first obtaining licenses and approvals from the Mississippi Commission. The
Company and its affiliates have obtained such approvals from the Mississippi
Commission.
Certain officers and employees of the Company and the officers, directors and
certain key employees of the Company's licensed subsidiaries must be found
suitable or be licensed by the Mississippi Commission. The Company believes it
has obtained, applied for, or is in the process of, applying for all necessary
findings of suitability with respect to such persons affiliated with the
Company, RCVP or Gaming, although the Mississippi Commission, in its discretion,
may require additional persons to file applications for findings of suitability.
In addition, any person having a material relationship or involvement with the
Company may be required to be found suitable, in which case those persons must
pay the costs and fees associated with such investigation. The Mississippi
Commission may deny an application for a finding of suitability for any cause
that it deems reasonable. Changes in certain licensed positions must be reported
to the Mississippi Commission. In addition to its authority to deny an
application for a findings of suitability, the Mississippi Commission has
jurisdiction to disapprove a change in a licensed position. The Mississippi
Commission has the power to require the Company and its registered or licensed
subsidiaries to suspend or dismiss officers, directors and other key employees
or sever relationships with other persons who refuse to file appropriate
applications or whom the authorities find unsuitable to act in such capacities.
Employees associated with gaming must obtain work permits that are subject to
immediate suspension under certain circumstances. The Mississippi Commission
must refuse to issue a work permit to a person convicted of a felony and it may
refuse to issue a work permit to a gaming employee if the employee has committed
certain misdemeanors or knowingly violated the Mississippi Act or for any other
reasonable cause.
At any time, the Mississippi Commission has the power to investigate and require
the finding of suitability of any record or beneficial stockholder of the
Company. Mississippi law requires any person who acquires more than 5% of the
common stock of a publicly traded corporation registered with the Mississippi
Commission to report the acquisition to the Mississippi Commission, and such
person may be required to be found suitable. Also, any person who becomes a
beneficial owner of more than 10% of the common stock of such a company, as
reported to the Securities and Exchange Commission, must apply for a finding of
suitability by the Mississippi Commission and must pay the costs and fees that
the Mississippi Commission incurs in conducting the investigation. The
Mississippi Commission has generally exercised its discretion to require a
finding of suitability of any beneficial owner of more than 5% of a public
company's common stock. However, the Mississippi Commission has adopted a policy
that permits certain institutional investors to own beneficially up to 10% of a
registered public company's common stock without a finding of suitability. If a
stockholder who must be found suitable is a corporation, partnership or trust,
it must submit detailed business and financial information including a list of
beneficial owners.
Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Mississippi
Commission may be found unsuitable. Management believes that compliance by the
Company with the licensing procedures and regulatory requirements of the
Mississippi Commission will not affect the marketability of the Company's
securities. Any person found unsuitable and who holds, directly or indirectly,
any beneficial ownership of the securities of the Company beyond such time as
the Mississippi Commission prescribes may be guilty of a misdemeanor. The
Company is subject to disciplinary action if, after receiving notice that a
person is unsuitable to be a stockholder or to have any other relationship with
the Company or its licensed subsidiaries, the Company: (i) pays the unsuitable
person any dividend or other distribution upon the voting securities of the
Company; (ii) recognizes the exercise, directly or indirectly, of any voting
rights conferred by
23
<PAGE> 24
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
securities held by the unsuitable person; (iii) pays the unsuitable person any
remuneration in any form for services rendered or otherwise, except in certain
limited and specific circumstances; or (iv) fails to pursue all lawful efforts
to require the unsuitable person to divest himself of the securities, including,
if necessary, the immediate purchase of the securities for cash at a fair market
value.
The Company may be required to disclose to the Mississippi Commission upon
request the identities of the holders of any debt securities. In addition, under
the Mississippi Act, the Mississippi Commission may in its discretion (i)
require holders of debt securities of registered corporations to file
applications, (ii) investigate such holders and (iii) require such holders to be
found suitable to own such debt securities. Although the Mississippi Commission
generally does not require the individual holders of obligations such as notes
to be investigated and found suitable, the Mississippi Commission retains the
discretion to do so for any reason, including but not limited to a default, or
where the holder of the debt instrument exercises a material influence over the
gaming operations of the entity in question. Any holder of debt securities
required to apply for a finding of suitability must pay all investigative fees
and costs of the Mississippi Commission in connection with such an
investigation.
RCVP and Gaming must maintain in Mississippi a current ledger with respect to
the ownership of their equity securities and the Company must maintain a current
list of stockholders in the principal office of RCVP which must reflect the
record ownership of each outstanding share of any equity issued by the Company.
The ledger and stockholder lists must be available for inspection by the
Mississippi Commission at any time. If any securities of the Company are held in
trust by an agent or by a nominee, the record holder may be required to disclose
the identity of the beneficial owner to the Mississippi Commission. A failure to
make such disclosure may be grounds for finding the record holder unsuitable.
The Company must also render maximum assistance in determining the identify of
the beneficial owner.
The Mississippi Act requires that the certificates representing securities of a
registered publicly traded corporation bear a legend to the general effect that
such securities are subject to the Mississippi Act and the regulations of the
Mississippi Commission. The Company has received from the Mississippi Commission
an exemption from this legend requirement. The Mississippi Commission has the
power to impose additional restrictions on the holders of the Company's
securities at any time.
Substantially all loans, leases, sales of securities and similar financing
transactions by a licensed gaming subsidiary must be reported to or approved by
the Mississippi Commission. A licensed gaming subsidiary may not make a public
offering of its securities, but may pledge or mortgage casino facilities if it
obtains the prior approval of the Mississippi Commission. The Company may not
make a public offering of its securities without the prior approval of the
Mississippi Commission if any part of the proceeds of the offering is to be used
to finance the construction, acquisition or operation of gaming facilities in
Mississippi or to retire or extend obligations incurred for one or more such
purposes. Such approval, if given, does not constitute a recommendation or
approval of the investment merits of the securities subject to the offering.
Changes in control of the Company through merger, consolidation, acquisition of
assets, management or consulting agreements or any form of takeover cannot occur
without the prior approval of the Mississippi Commission. The Mississippi
Commission may also require controlling stockholders, officers, directors, and
other persons 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.
The Mississippi legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and other corporate
defense tactics that affect corporate gaming licensees in Mississippi and
corporations whose stock is publicly traded that are affiliated with those
licensees may be injurious to stable and productive corporate gaming. The
Mississippi Commission has established a regulatory scheme to ameliorate the
potentially adverse effects of these business practices upon Mississippi's
gaming industry and to further Mississippi's policy to: (i) assure the financial
stability of corporate gaming operators and their affiliates;
24
<PAGE> 25
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
(ii) preserve the beneficial aspects of conducting business in the corporate
form; and (iii) promote a neutral environment for the orderly governance of
corporate affairs. Approvals are, in certain circumstances, required from the
Mississippi Commission before the Company may make exceptional repurchases of
voting securities above the current market price of its common stock (commonly
called "greenmail") or before a corporate acquisition opposed by management may
be consummated. Mississippi's gaming regulations will also require prior
approval by the Mississippi Commission if the Company adopts a plan or
recapitalization proposed by its Board of Directors opposing a tender offer made
directly to the stockholders for the purpose of acquiring control of the
Company.
Neither the Company nor any subsidiary may engage in gaming activities in
Mississippi while also conducting gaming operations outside of Mississippi
without approval of the Mississippi Commission. The Mississippi Commission may
require determinations that, among other things, there are means for the
Mississippi Commission to have access to information concerning the out-of-state
gaming operations of the Company and its affiliates. The Company has previously
obtained a waiver of foreign gaming approval from the Mississippi Commission for
operations in Nevada and will be required to obtain the approval or a waiver of
such approval from the Mississippi Commission prior to engaging in any
additional future gaming operations outside of Mississippi.
If the Mississippi Commission decides that a licensed gaming subsidiary violated
a gaming law or regulation, the Mississippi Commission could limit, condition,
suspend or revoke the license of the subsidiary. In addition, the licensed
subsidiary, the Company and the persons involved could be subject to substantial
fines for each separate violation. Because of such a violation, the Mississippi
Commission could attempt to appoint a supervisor to operate the casino
facilities. Limitation, conditioning or suspension of any gaming license or the
appointment of a supervisor could (and revocation of any gaming license would)
materially adversely affect the Company's and RCVP's gaming operations and/or
Gaming's manufacturer and distributor operations.
License fees and taxes, computed in various ways depending on the type of gaming
involved, are payable to the State of Mississippi and to the countries and
cities in which a licensed gaming subsidiary's respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually and are based upon (i) a
percentage of the gross gaming revenues received by the casino operation, (ii)
the number of slot machines operated by the casino or (iii) the number of table
games operated by the casino. The license fee payable to the State of
Mississippi is based upon "gaming receipts" (generally defined as gross receipts
less payouts to customers as winnings) and equals 4% of gaming receipts of
$50,000 or less per month, 6% of gaming receipts over $50,000 and less than
$134,000 per month, and 8% of gaming receipts over $134,000. The foregoing
license fees are allowed as a credit against the Company's Mississippi income
tax liability for the year paid. The gross revenue fee imposed by the City of
Vicksburg, Mississippi, where RCVP's casino operations are located, equals
approximately 4% of gaming receipts.
The Mississippi Commission has adopted a regulation requiring as a condition of
licensure or license renewal that a gaming establishment's plan include a
500-car parking facility in close proximity to the casino complex and
infrastructure facilities which will amount to at least 25% of the casino cost.
Management of the Company believes it is in compliance with this requirement.
The sale of alcoholic beverages by the Rainbow Casino operated by RCVP is
subject to the licensing, control and regulation by both the City of Vicksburg
and the Alcoholic Beverage Control Division (the "ABC") of the Mississippi State
Tax Commission. The Rainbow Casino area has been designated as a special resort
area, which allows the Rainbow Casino to serve alcoholic beverages on a 24-hour
basis. The ABC has the full power to limit, condition, suspend or revoke any
license for the serving of alcoholic beverages or to place such a licensee on
probation with or without conditions. Any such disciplinary action could (and
revocation would) have a material adverse effect upon the Rainbow Casino's
operations. Certain officers and managers of the Rainbow Casino must be
investigated by the ABC in connection with its liquor permits, and changes in
certain positions must be approved by the ABC.
25
<PAGE> 26
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
New Jersey. Gaming has previously been licensed by the New Jersey Commission as
a gaming-related casino service industry ("CSI") in accordance with the New
Jersey Casino Control Act (the "Casino Control Act"). Due to the change of
ownership of Gaming as a result of the Acquisition, Gaming's CSI license was
invalidated. Prior to the change of ownership of Gaming and in anticipation of
same, the Company submitted an application for CSI licensure. The New Jersey
Commission deemed the application complete and, as a result, since the
Acquisition the Company's operations in New Jersey continue uninterrupted
pursuant to transactional waivers which have been granted, and which the Company
believes should continue to be granted, by the New Jersey Commission on a
six-month blanket basis for parts and service and on a sale-by-sale basis for
all other products pending final action on the Company's application for CSI
licensure.
In considering the qualifications of an applicant for a CSI license, the New
Jersey Commission may require that the officers, directors, key personnel,
financial sources and stockholders (in particular those with holdings in excess
of 5%) of the applicant and its holding and intermediary companies demonstrate
their qualifications. In this regard, such persons and entities may be
investigated and may be required to make certain regulatory filings and to
disclose and/or to provide consents to disclose personal and financial data. The
costs associated with such investigation are typically borne by the applicant.
Federal Registration. The operating subsidiaries of the Company that are
involved in gaming activities are required to file annually with the Attorney
General of the United States in connection with the sale, distribution or
operation of gaming machines. All currently required filings have been made.
The U.S. Congress has created the National Gambling Impact and Policy Commission
to conduct a comprehensive study of all matters relating to the economic and
social impact of gaming in the United States. The enabling legislation provides
that, not later than two years after the enactment of such legislation, the
commission would be required to issue a report containing its findings and
conclusions, together with recommendations for legislation and administrative
actions. Any such recommendations, if enacted into law, could adversely affect
the gaming industry and have a material adverse effect on the Company's
business, financial condition or results of operations.
From time to time, certain legislators have proposed the imposition of a federal
tax on gross gaming revenues. No specific proposals for the imposition of such a
federal tax are currently pending. However, no assurance can be given that such
a tax will not be imposed in the future. Any such tax could have a material
adverse effect on the Company's business, financial condition or results of
operations.
Germany. German legislative authorities regulate and monitor the wall machine
industry so as to ensure certain manufacturing standards and the fairness of
each machine to users. The most significant legislation presently affecting the
wall machine industry relates to prescribed licensing procedures, the use,
installation and operation of machines and the taxation of same.
Wall machine manufacturers are dependent upon the successful introduction of new
products each year and currently are required to receive prior government
approval for each new product introduction. Manufacturers are required to apply
for licenses through an agency of the German federal Ministry of Economics. Such
agency maintains a policy of accepting only two licensing applications from an
individual applicant at any given time. Bally Wulff, through affiliates and
subsidiaries, is in a position to file up to six concurrent applications. After
receiving a prototype of a machine for which the applicant seeks government
licensing approval, the federal agency deliberates for periods that range from
approximately 6 to 24 months. If that product is approved, the wall machine
manufacturer is permitted to reproduce the sample machine initially submitted
for government approval. Every wall machine carries with it a small license card
that permits the machine to be operated for up to four years from the initial
date of sale, after which it may not be used in Germany. In Germany, wall
machines sold via the secondary market may be operated by a new owner but only
for the residual time remaining on each machine's four-year life. In addition to
licensing requirements for manufacturers, any person or entity which intends to
operate a licensed wall machine must apply to local regulatory authorities for a
license, which will not be granted by the authorities if
26
<PAGE> 27
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
facts justify the assumption that the applicant does not possess the requisite
reliability. In this proceeding, the applicant must furnish a police certificate
of conduct.
German legislation prohibits the public play of wall machines by individuals
under age 18. Voluntary agreements among manufacturers and certain amusement
game trade associations, among other things, restrict wall machine advertising
and the ability of a player to play more than two machines at once, require all
machines to carry visible warning notices and provide that every wall machine is
automatically switched off for three minutes after one hour of continuous play.
The Spielverordnung (gaming ordinance) specifically governs wall machines. These
regulations limit game payouts to DM 4.00 (approximately $2.29) per game,
require a minimum payout percentage, detail where the machines may be installed,
how many may be installed and by whom, which games are prohibited, the technical
requirements of the machines and technical review and approval. Operators must
comply with regulations which stipulate how many machines may operate within
defined square foot areas (15 square meters per machine, with a maximum of ten
machines per location). The Spielverordnung was modified in 1985 to achieve a
significant reduction of gaming machines. Gaming halls which through December
19, 1985 had more gaming machines than permitted under the revised regulations
had a transition period through December 31, 1995 to comply with the revised
regulations. Such facilities were allowed to keep the number of wall machines
used in operations in 1985 until December 31, 1990. During the period January 1,
1991 to December 31, 1995 they were entitled to two-thirds of such total number,
but had to be in compliance with the new limits by January 1, 1996. In taverns,
restaurants, hotels and certain other establishments, no more than two gaming
machines are permitted.
The Baunutzungsverordnung (Ordinance Regarding the Use of Real Estate) governs
the zoning classification of land and the type and density of development within
the various zoning classifications. Effective January 27, 1990, the
Baunutzungsverordnung was amended essentially to restrict the development of
larger gaming halls to core commercial areas, limit the permissibility of
smaller gaming halls in various types of mixed use zones and to ban gaming halls
in most types of residential and all types of industrial use areas. Prior to
such amendment, gaming halls, regardless of size, were generally allowed in
core, business, mixed and industrial zones. In addition, on a case by case
basis, each local zoning agency is authorized to exclude certain types of
otherwise permissible uses, including gaming halls.
Subject to certain exceptions, V.A.T. of 15% is generally assessed on the sale
or supply of any goods and services in Germany. Since the total amount paid for
particular goods or services is considered to be the gross price in calculating
such tax, the actual rate is 13.04%. The basis for taxation is the cash
remaining in the machines. The rule requiring a minimum payout percentage is
applied to the amount remaining in the cash box net of such V.A.T. Depending on
the municipality in which a machine is located, operators may also have to pay a
monthly leisure tax on each machine of up to DM 600 (approximately $344). The
German tax court recently let stand a regulation that permits local
municipalities to impose additional taxes on gaming machine operators.
The business conducted by Bally Wulff had benefited from the Berlin Promotion
Act, a special tax statute which was intended to support the economy of West
Berlin in various ways. With the reunification of Germany, the need for benefits
provided by the law is perceived to have decreased. Consequently, the German
government enacted amendments to the Berlin Promotion Act which phased out, over
a number of years, most of the tax benefits and incentives provided by the law.
This phase out is now complete.
During fiscal 1996, Bally Wulff increased the amount of tax reserves by $1.0
million (to a total reserve of $1.4 million) as a result of developments in an
ongoing quadrennial audit of Wulff's tax returns for the years 1988 through
1991. The German tax authorities have proposed preliminary adjustments which
range from $1.4 million (which has been accrued) to $5.0 million.
27
<PAGE> 28
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
Additional Jurisdictions. The Company, in the ordinary course of its business,
routinely considers business opportunities to expand its gaming operations into
additional jurisdictions. Although the laws and regulations of the various
jurisdictions in which the Company operates or into which the Company may expand
its gaming operations vary in their technical requirements and are subject to
amendment from time to time, virtually all of those jurisdictions require
licenses, permits, documentation of qualification, including evidence of
financial stability, and other forms of approval for companies engaged in the
manufacture and distribution of gaming machines as well as for the officers,
directors, major stockholders and key personnel of such companies.
The Company and its key personnel have obtained, or applied for, all government
licenses, registrations, findings of suitability, permits and approvals
necessary for the manufacture and distribution, and operation where permitted,
of their gaming machines in the jurisdictions in which the Company currently
does business. The Company and the holders of its securities may be subject to
the provisions of the gaming laws of each jurisdiction where the Company or its
subsidiaries are licensed and/or conduct business, including, without
limitation, the States of Arizona, Colorado, Connecticut, Illinois, Indiana,
Iowa, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada,
New Jersey, New Mexico, South Dakota, Wisconsin, and the local regulatory
authority within each such state as well as Australian, Canadian and other
foreign gaming jurisdictions in which BGII and its subsidiaries are licensed or
conduct business. As a result of the consummation of the Acquisition, the
Company and its officers and directors have been required to apply for any
government licenses, permits and approvals necessary or required by each of
these jurisdictions.
Holders of common stock of an entity licensed to manufacture and sell gaming
machines, and in particular those with holdings in excess of 5%, should note
that local laws and regulations may affect their rights regarding the purchase
of such common stock and may require such persons or entities to make certain
regulatory filings, or seek licensure, findings of qualification or other
approvals. ln some cases this process may require the holder or prospective
holder to disclose and/or provide consents to disclose personal and financial
data in connection with necessary investigations, the costs of which are
typically borne by the applicant. The investigatory and approval process can
take three to six months to complete under normal circumstances.
28
<PAGE> 29
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
ITEM 2. PROPERTIES
The following table sets forth information regarding the Company's leased
properties (exclusive of space leases in connection with its gaming device
routes) as of June 30, 1997, all of which are fully utilized unless otherwise
noted:
<TABLE>
<CAPTION>
ANNUAL
BUILDING RENTAL
LOCATION USE SQUARE FEET PAYMENTS
-------- --- ----------- --------
(IN 000S)
<S> <C> <C> <C>
Las Vegas, Nv. Partially subleased 72,000 $ 515
Las Vegas, Nv. Route Operations building 18,500 180
Las Vegas, Nv. Advanced Product Development Group 3,600 43
New York, N.Y. Administrative offices 4,400 158
Sparks, Nv. Administrative offices and 38,000 275
warehousing
Sparks, Nv. Sales offices and warehousing 11,000 114
Absecon, N.J. Sales offices and warehousing 15,800 90
Biloxi, Ms. Sales offices 6,400 24
Golden, Co. Sales offices 1,500 16
Rosemont, Il. Sales offices 4,900 34
Dania, Fl. Sales offices 3,400 36
Elko, Nv. Sales office and route operations 4,200 36
Laughlin, Nv. Sales offices 600 10
Atlantic City, N.J. Administrative offices 750 10
San Juan, Puerto Rico Sales offices 1,000 12
Sidney, Australia Sales offices 700 36
Johannesburg, So. Sales offices 2,000 20
Africa
Las Vegas, Nv. Warehousing 103,500 390
Berlin, Germany Administrative offices and
manufacturing 98,000 535
Hannover, Germany Administrative offices and
warehousing 32,000 240
Reno/Sparks, Nv. Route operations 12,100 76
Carson City, Nv. Route operations 2,500 8
Winnemucca, Nv. Route operations 1,200 4
Las Vegas, Nv. Route location 8,000 444
Las Vegas, Nv. (1) Ground Lease --- 327
Sparks, Nv. (2) Ground Lease --- 5
Vicksburg, MS Administrative offices 2,700 19
Vicksburg, MS Administrative offices 1,200 9
New Orleans, La. Administrative offices & route 6,000 57
operations
Covington, La. OTB Operation 2,500 36
Metairie, La. OTB Operation 11,000 54
New Orleans, La. OTB Operation 5,100 25
</TABLE>
(1) Lease consists of ground lease for parking at the Trolley Stop.
(2) Lease consists of long-term land lease for parking at the Plantation.
29
<PAGE> 30
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
The following table sets forth information regarding properties owned by the
Company as of June 30, 1997, all of which are fully utilized unless otherwise
noted:
<TABLE>
<CAPTION>
BUILDING
LOCATION USE SQUARE FEET (1)
-------- --- ---------------
(IN 000S)
<S> <C> <C>
Las Vegas, Nv. Administrative offices and
manufacturing (a) 150,000
Reno/Sparks, Nv. Casino (a) 35,000
Vicksburg, Ms. Casino 24,000
Vicksburg, Ms. Administrative offices 3,200
Vicksburg, Ms. Vacant- Land ---
Las Vegas, Nv. Tavern/Land 5,000
North Las Vegas, Nv. Parking ---
Atlantic City, N.J. Subleased office space 7,000
</TABLE>
(a) These facilities are collateral for the New Credit Facility. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - - Liquidity and Capital Resources".
In addition, the Company leases 21 properties that have been subleased in
connection with its Route Operations. The properties range in size from
approximately 1,750 square feet to 7,700 square feet. The remaining terms of the
leases range from one to 13 years with monthly payments ranging from
approximately $1,700 to $10,500.
In addition to the principal facilities, the Company has 21 leased locations and
two owned locations in Germany which are primarily used for sales and service
offices as well as for warehousing purposes. The properties range in size from
approximately 2,800 square feet to 27,000 square feet. The leased locations have
terms of occupancy varying from month-to-month tenancies to five years with
monthly payments ranging from approximately $1,000 to $21,200.
See Note 9 of Notes to Consolidated Financial Statements for information as to
the Company's lease commitments with respect to the foregoing rental properties.
The Company believes its facilities are suitable for its needs and the Company
has no future expansion plans that would make these properties inadequate.
ITEM 3. LEGAL PROCEEDINGS
LITIGATION
In an action filed on December 2, 1996, the Company was named as a defendant in
an action brought by Canpartners Investments IV and Cerberus Partners, in
federal district court for the Southern District of New York. The Company
entered into certain loan commitment letters with the plaintiffs in August 1995,
contemplating that the plaintiffs would lend approximately $30 million to
partially fund the Company's then pending hostile tender offer for BGII. The
Company entered into a merger agreement with BGII in October 1995 and did not
use funds provided by the plaintiffs to fund the acquisition of BGII which was
completed in June 1996. The plaintiffs have asserted claims based upon the loan
commitment letters and failure to pay termination fees in connection with such
loan commitment, and seek damages on various theories, ranging from $2.2 million
(breach of contract and fraudulent concealment) to in excess of $12.0 million
(breach of duty of good faith and fair dealing). The Company believes that it
has strong defenses and has filed a motion to dismiss the compliant. The Company
intends to defend the action vigorously.
On September 25, 1995, BGII was named as a defendant in a class action lawsuit
filed in Federal District Court in Nevada, by Larry Schreirer on behalf of
himself and all others similarly situated. The plaintiffs filed suit against
BGII and approximately 45 other defendants. Each defendant is involved in the
gaming business as either a gaming machine
30
<PAGE> 31
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
manufacturer, distributor, or casino operator. The class action lawsuit arises
out of alleged fraudulent marketing and operation of casino video poker machines
and electronic slot machines. The plaintiffs allege that the defendants have
engaged in a course of fraudulent and misleading conduct intended to induce
people into playing their gaming machines based on a false belief concerning how
those machines actually operate as well as the extent to which there is actually
an opportunity to win on any given play. The plaintiffs allege that the
defendants' actions constitute violations of the Racketeer Influenced and
Corrupt Organizations Act (RICO) and give rise to claims of common law fraud and
unjust enrichment. The plaintiffs are seeking monetary damages in excess of $1.0
billion, and are asking that any damage awards be trebled under applicable
Federal law. Management believes the plaintiffs' lawsuit to be without merit.
The Company intends to vigorously pursue all legal defenses available to it.
In August 1996, the Company received demand notices from a holder of customer
notes receivable which were sold on a recourse basis to a third party for which
payments were in arrears from December 1995. In December 1996 the holder of the
notes filed suit against the Company seeking payment from the Company of
approximately $3.6 million. The Company intends to vigorously pursue all legal
defenses available to it.
The Company is also a party to various lawsuits relating to routine matters
incidental to its business. Management does not believe that the outcome of such
litigation, including the matters above, in the aggregate, will have a material
adverse effect on the Company.
The Company settled its litigation with WMS Industries, Inc. ("WMS") for $4.5
million, which was paid in April 1997. The lawsuit arose out of a dispute
concerning a break-up fee due under the then proposed WMS merger with BGII. This
settlement was treated as an adjustment to goodwill in the accompanying
consolidated financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 16, 1997, the Company held its annual shareholders meeting at which the
shareholders were asked to vote on two matters: 1) the re-election of Mr.
Anthony DiCesare and Mr. Joel Kirschbaum to the Board of Directors, and 2) the
adoption of the 1996 Long-Term Incentive Plan. Of the 31,838,632 shares of
common stock eligible to vote, 28,925,387 shares were voted for, and 1,214,681
against Mr. DiCesare and 28,923,767 shares for, and 1,216,301 voted against Mr.
Kirschbaum. Of the 21,750,236 votes cast related to the 1996 Plan, 14,673,246
shares voted in favor of the 1996 Plan, 6,976,278 voted against and 100,712
abstained.
31
<PAGE> 32
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Common Stock is traded on the Nasdaq National Market under the symbol
"ALLY". The following table sets forth the high and low closing bid price of the
Common Stock as reported by Nasdaq for the periods indicated. These prices
reflect inter-dealer prices, without retail mark-up or mark-down or commissions
and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
--------------------
High Low
---- ---
<S> <C> <C>
FISCAL YEAR ENDED JUNE 30, 1996
1st Quarter $ 6.25 $ 4.56
2nd Quarter 5.63 2.75
3rd Quarter 5.38 3.00
4th Quarter 5.00 2.88
FISCAL YEAR ENDED JUNE 30, 1997
1st Quarter $ 4.00 $ 2.00
2nd Quarter 4.38 3.00
3rd Quarter 4.56 3.38
4th Quarter 4.00 3.07
</TABLE>
As of September 11, 1997 the Company had approximately 1,750 holders of record
of its Common Stock.
There is currently no established public trading market for the Company's Series
E Special Stock.
The Company has never declared or paid cash dividends on its Common Stock. The
indenture for the Company's 12 7/8% Notes (substantially all of which were
repurchased subsequent to June 30, 1997), the indenture for the Company's 10%
Senior Subordinated Notes (the "Indenture") and the credit agreement for the
Company's new credit facility, each restrict the Company's ability to pay any
dividends or make any other payment or distribution of any of its Restricted
Subsidiaries' Equity Interests (as defined). The Company intends to follow a
policy of retaining earnings, if any, to finance growth of its business and does
not anticipate paying any cash dividends in the foreseeable future. The
declaration and payment of future dividends on the Common Stock will be at the
sole discretion of the Board of Directors and will depend on the Company's
profitably, ability to pay dividends under the terms of the Indenture and the
Company's financial condition, capital requirements, statutory and contractual
restrictions, future prospects and other factors deemed relevant.
32
<PAGE> 33
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data have been derived from the
audited financial statements of the Company. The table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and Notes
thereto.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED JUNE 30,
-----------------------------------------------------------------
1993 1994 1995(1) 1996(2) 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN 000'S, EXCEPT PER SHARE AMOUNTS)
STATEMENTS OF OPERATIONS DATA
Revenues:
Gaming equipment and systems $ 99 $ 65 --- $ 10,575 $ 134,734
Wall machines and amusement games --- --- --- 3,356 131,934
Route operations 96,282 102,830 106,854 109,938 127,028
Casino operations 16,710 20,159 25,134 48,509 51,450
--------- --------- --------- --------- ---------
113,091 123,054 131,988 172,378 445,146
--------- --------- --------- --------- ---------
Costs and expenses:
Cost of gaming equipment and systems 49 20 --- 7,213 84,496
Cost of wall machines and amusement games --- --- --- 2,022 68,426
Cost of route operations 72,614 76,332 79,887 84,212 95,716
Cost of casino operations 11,543 14,955 14,231 22,046 22,269
Selling, general and administrative 19,758 22,629 28,249 30,620 100,415
Provision for doubtful receivables 461 705 400 1,020 9,059
Depreciation and amortization 8,718 9,530 9,520 10,988 22,606
Direct acquisition costs (3) --- --- 1,669 55,843 ---
Unusual items --- 6,351 2,293 5,498 700
--------- --------- --------- --------- ---------
113,143 130,522 136,249 219,462 403,687
--------- --------- --------- --------- ---------
Operating income (loss) (52) (7,468) (4,261) (47,084) 41,459
Other income (expense)
Interest income 998 2,084 2,798 1,571 1,620
Interest expense (5,046) (6,830) (8,133) (8,897) (23,626)
Rainbow royalty (4) --- --- (810) (4,070) (4,722)
Minority interest --- (506) (397) (963) (1,092)
Other, net 450 (167) 317 301 139
--------- --------- --------- --------- ---------
Income (loss) before income taxes (3,650) (12,887) (10,486) (59,142) 13,778
Income tax provision --- (241) (265) (755) (7,993)
--------- --------- --------- --------- ---------
Net income (loss) (3,650) (13,128) (10,751) (59,897) 5,785
Special stock dividends, including repurchase premium --- --- --- (362) (11,974)
--------- --------- --------- --------- ---------
Net loss applicable to common shares (3,650) (13,128) (10,751) (60,259) (6,189)
========= ========= ========= ========= =========
Net loss per common share $ (0.38) $ (1.28) $ (0.95) $ (4.64) $ (0.19)
========= ========= ========= ========= =========
OTHER DATA
Operating income (loss) before unusual
items and direct acquisition costs $ (52) $ (1,117) $ (299) $ 14,257 $ 42,159
</TABLE>
33
<PAGE> 34
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
AS OF JUNE 30
---------------------------------------------------------
1993 1994 1995 1996 1997
------ ------ ----- ----- ----
(In 000's)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (5)
Cash and cash equivalents and
securities available for sale $9,580 49,574 $37,414 $48,057 28,924
Working capital 7,991 50,926 31,476 111,009 110,795
Total assets 73,768 119,416 126,348 375,504 352,016
Total long term debt,
including current maturities 44,798 90,726 101,397 191,344 173,839
Series B Special Stock --- --- --- 51,552 58,981
Total stockholders' equity 22,665 15,099 9,985 69,846 53,555
</TABLE>
(1) The Company acquired the general partnership interest in the Rainbow
Casino Vicksburg Partnership, L.P. (RCVP) on March 29, 1995 and began
consolidating the results or RCVP since that date.
(2) The Company acquired BGII on June 18, 1996. Therefore the results of
operations for the year ended June 30, 1996 include the results of
operations of BGII for the last twelve days of that fiscal year. See
note 2 to the Consolidated Financial Statements.
(3) Includes non-cash accounting loss on debenture conversion of
$30,079,000 in fiscal year 1996 as a result of the conversion of the
Company's Convertible Debentures into equity securities.
(4) Represents royalty fee related to the HFS financing at the Rainbow
Casino. The Company repurchased this royalty obligation from HFS on
August 12, 1997.
(5) See discussion of refinancing transaction completed in August 1997 in
"Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources".
34
<PAGE> 35
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
In August 1997 the Company completed a series of related transactions as
described below ("the Refinancing") which consisted of the private placement of
$150.0 million of Senior Subordinated Notes and the closing of $230.0 million of
bank financing. The bank financing provides for (i) term loans in the aggregate
amount of up to $140.0 million, comprised of a $75.0 million tranche with a
7 1/2-year term (the "Tranche B Term Loan"), a $40.0 million tranche with an
8-year term (the "Tranche C Term Loan", and together with the Tranche B Term
Loan, the "Term Loan Facilities") and a $25.0 million tranche with a 7 1/2-year
term (the "Delayed Draw Term Facility"); and (ii) a $90.0 million revolving
credit facility with a 6-year term (the "Revolving Credit Facility").
As part of the Refinancing, the Company used the proceeds of the Senior
Subordinated Note offering, together with borrowings under the Revolving Credit
Facility, the Term Loan Facilities and the Delayed Draw Term Facility and cash
on hand to fund (a) the repurchase at a premium of substantially all of the
Company's 12 7/8% Notes, plus accrued interest to August 8, 1997 totaling $183.7
million, (b) the redemption at liquidation value of all of the Company's Series
B Preferred Stock on September 8, 1997 totaling $77.6 million, (c) the purchase
from HFS Gaming Corporation of the right to receive royalty payments based on
revenues of the Rainbow Casino and the purchase of related debt owed to an HFS
affiliate, National Gaming Mississippi, Inc. on August 12, 1997 totaling $26.3
million and (d) the payment of transaction fees and expenses totaling $16.5
million. At June 30, 1997, based on the terms of the new $90.0 million Revolving
Credit Facility, the Company would have been able to borrow the full amount of
the revolving credit line, of which the Company had initial borrowings of
approximately $14.5 million on August 8, 1997. The borrowing base for the
revolving credit facility consists of eligible receivables and inventory, as
defined in the credit agreement. Additionally, in July 1997 the Company redeemed
the remaining balance of its 7 1/2 Convertible Debentures at a price of 104, or
a total of $1.7 million.
On a pro forma basis for the year ended June 30, 1997, assuming the Refinancing
had occurred on July 1, 1996, the Company would have reported earnings before
interest, taxes, and depreciation and amortization, less casino royalty and
minority interest plus direct acquisition costs and unusual items (EBITDA) of
$63.7 million, net income available to common shares of $6.4 million and net
income per share of $0.16 or a $0.35 improvement over the reported net loss per
share of $0.19. In conjunction with the Refinancing, the Company incurred fees
and expenses totaling approximately $78.4 million, including the premium on the
repurchase of the 12 7/8% Notes of $27.7 million and $16.4 million for the
difference between the carrying value and the liquidation value of the Series B
Preferred Stock, all of which will be recorded in the quarter ended September
30, 1997. On a pro forma basis as of June 30, 1997, in comparison to the actual
year end balances, the Refinancing would have resulted in a decrease in cash and
cash equivalents of $12.8 million, a decrease in net working capital of $13.5
million, an increase in total long-term debt of $128.0 million, but the
elimination of the 12 7/8% Notes and Series B Preferred Stock. On an ongoing
basis the Company will continue to be highly leveraged and will have significant
interest costs, however in the near term the Company will have only limited
principal payments required on its long-term indebtedness.
At June 30, 1997, the Company actually had $28.9 million in cash and cash
equivalents and $24.1 million in availability on its former revolving lines of
credit. In addition the Company had working capital of approximately $110.8
million, a decrease of approximately $0.2 million from June 30, 1996 which is
explained below. Consolidated cash and cash equivalents at June 30, 1997
includes approximately $9.0 million of cash which is utilized in Casino and
Route Operations which is held in vaults, cages or change banks.
Management believes that cash flow from operating activities, cash and cash
equivalents held and the new $90.0 million Revolving Credit Facility will
provide the Company with sufficient capital resources and liquidity. At June 30,
1997, the Company did not have any significant commitments for capital
expenditures.
35
<PAGE> 36
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
The following table presents the components of consolidated working capital at
June 30, 1996 and 1997:
<TABLE>
<CAPTION>
Balances at June 30,
1996 1997 Change
---- ---- ------
(In $000's)
<S> <C> <C> <C>
Cash and Cash Equivalents $ 48,057 $ 28,924 $(19,133)
Accounts and Notes Receivable, net 93,502 87,701 (5,801)
Inventories, net 41,656 37,329 (4,327)
Other Current Assets 8,354 9,627 1,273
-------- -------- --------
Total Current Assets 191,569 163,581 (27,988)
Accounts Payable 16,240 14,270 1,970
Accrued Liabilities 38,543 37,392 1,151
Current Maturities of Long-Term Debt 25,777 1,124 24,653
-------- -------- --------
Total Current Liabilities 80,560 52,786 27,774
-------- -------- --------
Net Working Capital $111,009 $110,795 $ (214)
======== ======== ========
</TABLE>
The net change in cash and cash equivalents during the fiscal year ended June
30, 1997 resulted from EBITDA generated, offset by: cash used for capital
expenditures of approximately $13.3 million; cash used for principal payments on
debt including the revolving lines of credit borrowings of approximately $7.5
million in the United States and approximately $4.1 million in Germany and
payment of the VSI loan and other debt totaling approximately $6.8 million; and
payments made for accrued direct acquisition costs, the accrued distribution
payable to the limited partner in the Rainbow Casino Vicksburg Partnership,
L.P., the payment of the Rainbow Royalty and the payment of the WMS litigation
settlement. In addition, approximately $3.9 million of cash was used to purchase
shares of Series B Special Stock during fiscal year 1997. The Company also made
its semi-annual interest payments on the Senior Secured Notes on December 30,
1996 and June 30, 1997 aggregating $20.5 million. During the fiscal year ended
June 30, 1997, current maturities of long term debt were reduced primarily due
to principal payments plus, due to the Refinancing in August 1997, the current
portion of the lines of credit and certain other debt instruments were
reclassified to long-term debt as of June 30, 1997. The primary change to all
other working capital components during fiscal year 1997 were the result of a
decrease in the translation rate between the German mark and the U.S. dollar.
During the year ended June 30, 1997, the Company generated cash flows from
operating activities of $24.1 million, an increase of $23.2 million over the
prior year.
The following table presents the Company's EBITDA. For purposes of comparability
the 1996 amounts are further adjusted to include BGII's results for the entire
year.
<TABLE>
<CAPTION>
Year Ended June 30,
1996 1997
---- ----
(In $000's)
<S> <C> <C>
EBITDA by business unit:
Gaming Equipment and Systems $15,716 $16,671
Wall Machines and Amusement Games 13,376 29,719
Route Operations 16,691 20,200
Casino Operations (a) 11,229 12,630
Corporate expenses (17,300) (19,177)
Minority interest (963) (1,092)
------- -------
EBITDA $38,749 $58,951
======= =======
</TABLE>
(a) Presented after deducting Casino Royalty
36
<PAGE> 37
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
The Company believes that the above analysis of EBITDA (which excludes direct
acquisition costs and unusual items) is a useful adjunct to net income, cash
flow and other GAAP measurements. However, this information should not be
construed as an alternative to net income or any other GAAP measure of
performance as an indicator of the Company's performance or to GAAP-defined cash
flows generated by operating, investing and financing activities as an indicator
of cash flows or a measure of liquidity.
Customer Financing
Management believes that customer financing terms and leasing have become an
increasingly important competitive factor for the Gaming Equipment and Systems
and Wall Machine and Amusement Games business units, respectively. Competitive
conditions sometimes require Gaming Equipment and Systems to grant extended
payment terms on gaming machines systems and other gaming equipment, especially
for sales in emerging markets. While these financings are normally
collateralized by such equipment, the resale value of the collateral in the
event of default may be less than the amount financed. In conjunction with sales
by Gaming Equipment and Systems, with recourse to the Company, of certain trade
receivables to third parties, the Company had guaranteed amounts due from
various customers of approximately $10.5 million at June 30, 1997. The Company
has reserved approximately $8.3 million at June 30, 1997 for all of its sales of
receivables with recourse to the Company. It is possible that one or more
customers whose obligation has been guaranteed by Gaming Equipment and Systems
may be unable to make payments as such amounts become due. In such event, Gaming
Equipment and Systems may become responsible for repayment of at least a portion
of such amounts over the term of the receivables. Accordingly, the Company will
have greater exposure to the financial condition of its customers in emerging
markets than has historically been the case in established markets like Nevada
and Atlantic City. In August 1996, the Company received demand notices from the
holder of notes related to one customer's trade receivables for which payments
were in arrears since December 1995 and in December 1996 the holder of the notes
filed suit against the Company to seek payment from the Company. The lawsuit is
for approximately $3.6 million. Bally Wulff provides customer financing for
approximately 10% of its sales and also provides lease financing to its
customers. Lease terms are generally for six months, but are also available for
12 and 43 month terms.
RESULTS OF OPERATIONS
1997 COMPARED WITH 1996
GENERAL
To enhance the comparability for the following discussion of the results of
operations, the operating results for 1996 are presented on a pro forma basis
assuming the BGII acquisition had occurred prior to the start of the 1996 year.
The acquisition of BGII actually occurred on June 18, 1996.
GAMING EQUIPMENT AND SYSTEMS
For the year ended June 30, 1997, Gaming Equipment and Systems reported revenues
of $134.7 million, an increase of 2%, compared to revenues of $132.3 million in
the prior year. Bally Gaming reported shipments of approximately 18,200 new
gaming machines, an increase of 1% compared to shipments of approximately 18,000
in the prior year. The volume improvement resulted primarily from a general
increase in replacement demand from existing casinos offset by a lower number of
new casino openings in the year ended June 30, 1997. By market segment, Bally
Gaming's unit sales for the current year consisted of approximately 8,300 units
to the Nevada and Atlantic City markets, 7,600 units to international markets
and 2,300 units to riverboats, Native American and other domestic markets. Bally
Gaming reported revenues from the sale of new gaming machines of $96.7 million,
an increase of 6%, compared to $91.3 million in the prior year due to higher
unit volume and higher average selling prices of new machines. Bally Systems
reported revenues of $22.3 million, an increase of 22%, compared to revenues of
$18.2 million in the prior year period.
37
<PAGE> 38
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
Bally Systems revenue improvement resulted primarily from increased shipments to
new installations such as New York-New York, Casino Niagara, Casino Rama, and
the Harrah's Riverboat and Players Island Casinos in St. Louis.
For the year ended June 30, 1997, gross profit margins improved to 37% from 35%
in the prior year period. The gross margin improvement resulted primarily from a
higher average sales price for new machines and the impact of higher Bally
Systems sales. Gaming Equipment and Systems reported operating income of $10.6
million, a decrease of 23%, compared to operating income of $13.8 million in the
prior year period. The operating income decrease resulted primarily from greater
selling, general and administrative expenses (including higher research and
development costs) and the impact of greater depreciation expense from
amortizing goodwill and other intangibles as a result of the BGII acquisition,
partially offset by the aforementioned revenue and gross margin increases.
WALL MACHINES AND AMUSEMENT GAMES
For the year ended June 30, 1997, Wall Machines and Amusement Games reported
revenues of $131.9 million, an increase of 23%, compared to revenues of $107.1
million in the prior year. The revenue improvement resulted primarily from an
87% increase in new wall machine units sold as Wall Machines and Amusement Games
expanded its market share due to popularity of its product offerings and, to a
lesser extent, demand increased as a result of a change in German regulations
effective January 1, 1997, requiring all wall machines to have internal meters
to track play. In addition, Wall Machines and Amusement Games enhanced its
leasing program whereby new wall machines are leased to customers pursuant to
operating leases which provide a stream of revenues and cash flows over the term
of the leases which range from six months to three and one half years. For the
year ended June 30, 1997, Wall Machines and Amusement Games leased approximately
4,000 new wall machines, which is a 300% increase from the prior year period.
Revenues were unfavorably impacted by a decrease in amusement game sales as
operators weighted their mix of capital expenditures toward new wall machines.
The currency translation impact of the fluctuation of the German mark versus the
U.S. dollar reduced revenues by $12.2 million during the current year.
For the year ended June 30, 1997, gross profit margin improved to 48% from 39%
in the prior year. The gross margin improvement resulted primarily from the
favorable impact of greater production volume in Wall Machines and Amusement
Games' production facility. Wall Machines and Amusement Games reported operating
income of $23.3 million, an increase of 207%, compared to $7.6 million in the
prior year period. The operating income improvement resulted primarily from the
aforementioned revenue and gross margin increases, partially offset by an
increased provision for doubtful receivables as well as higher selling, general
and administrative expenses due to increased marketing costs.
ROUTE OPERATIONS
For the year ended June 30, 1997, the Route Operations business unit reported
total revenues of approximately $127.0 million, an increase of 16%, compared to
revenues of $110.0 million in the prior year. Revenues from Nevada route
operations increased approximately $15.0 million (16%) over the prior year. This
increase was attributable to an increase in the average net win per gaming
machine per day of 8% to $52.40 from $48.60 in the prior year and an increase in
the weighted average number of gaming machines during the current year of 7% to
5,660 units as compared to 5,290 units in the prior year. Gamblers' Bonus, a
cardless club and player tracking system launched in December 1995, had a
favorable impact on the net win per day. As of June 30, 1997, the Gamblers'
Bonus product was installed in approximately 1,500 gaming machines at 130
locations statewide. Revenues from route operations in Louisiana increased $2.0
million (12%) primarily as a result of an improvement in the net win per gaming
machine per day of 8% to $74.10 from $68.50 in the prior year and a 3% increase
in the average number of machines to 700 from 680 in the prior year.
For the year ended June 30, 1997, cost of revenues for Route Operations totaled
$95.7 million, an increase of $11.5 million (14%) compared to the prior year. As
a percentage of revenues, costs of revenues improved to 75.4% from 76.6% in the
prior year. Cost of revenues for Nevada route operations increased 14% as
compared to the prior year, but, as a percent of related revenues, improved to
77.3% from 79.0% in the prior year due primarily to higher revenues
38
<PAGE> 39
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
while costs associated with new and renewed contracts remained relatively flat.
Costs of revenues for route operations in Louisiana increased 13% primarily as a
result of the increase in revenues. As a percent of related revenues, cost of
revenues for route operations in Louisiana increased to 64.2% from 63.3% in the
prior primarily due to a slight increase in the percentage of revenues paid to
the Fairgrounds Racetrack. Cost of route revenues for Route Operations includes
rents under both space lease and revenue sharing arrangements, gaming taxes and
direct labor, including related payroll taxes and benefits.
In the year ended June 30, 1996, Nevada route operations incurred unusual items
totaling $2.1 million. Reserves were increased by $1.4 million for certain parts
inventories which became obsolete and were subsequently disposed of due to the
impact of recent technological changes to gaming devices being deployed as a
result of the new Gambler's Bonus product. In addition an accrual of $0.7
million was established to reserve for the present value of the future lease
payments for one small casino location for which cash flows received under the
participation agreement are currently inadequate to service the building lease
paid by the Company.
For the fiscal year ended June 30, 1997, the Route Operations business unit
reported operating income of $13.1 million, an increase of 41% compared to
operating income of $9.3 million in the prior year. The operating income
improvement resulted from the aforementioned increase in revenues and the
improvement in operating costs as a percentage of revenues and the lack of
unusual items in the current year, partially offset by an increase in selling,
general, and administration expenses, primarily greater marketing costs at both
operations and an increased provision for doubtful receivables for the Nevada
route operations.
CASINO OPERATIONS
For the year ended June 30, 1997, the Casino Operations business unit reported
revenues of $51.5 million, an increase of 13%, compared to revenues of $45.4
million in the prior year excluding revenues from closed casinos and taverns as
described below. This increase is due to a 17% increase at the Rainbow Casino
and a 2% increase at the Rail City Casino. The improvement at the Rainbow Casino
was attributable to the continuing impact of its direct marketing campaigns and
a higher average market share than in the prior year. Revenues during the
current year at the Rail City Casino were adversely impacted by severe weather
in the Reno area during the third quarter and an internal remodeling project,
which has now been completed.
For the year ended June 30, 1997, the cost of revenues for Casino Operations
increased 13% to $22.3 million compared to $19.8 million in the prior year
excluding cost of revenues from closed casinos and taverns. As a percentage of
revenues, the costs of revenues improved slightly to 43.3% compared to 43.6% in
the prior year. As a percent of related revenues, cost of revenues for the
Rainbow Casino increased to 37.1% from 36.4% in fiscal 1996 primarily due to
increased costs associated with taking over operations at the newly remodeled
restaurant . Cost of revenues for the Rail City, as a percent of related
revenues, improved to 64.1% from 64.7% in the prior year due primarily to higher
revenues while direct costs remained relatively stable. Cost of casino revenues
includes cost of goods sold, gaming taxes, rent and direct labor including
related taxes and benefits.
For the year ended June 30, 1997, the Casino Operations business unit reported
operating income, net of casino royalty, of $10.7 million, an increase of 14%,
compared to operating income of $9.4 million in the prior year. The operating
income improvement resulted from the aforementioned increase in revenues and
reduced operating costs as a percentage of revenues, partially offset by an
increase in selling, general and administrative costs, principally due to
increased marketing efforts at both locations. On August 12, 1997, the Company
purchased from Hospitality Franchise Systems the right to receive royalty
payments based on revenues of the Rainbow Casino. The Rainbow Casino royalty
fees incurred during the fiscal year ended June 30, 1997 totaled $4.7 million.
REVENUES AND EXPENSES FOR CLOSED CASINOS AND TAVERNS
During the year ended June 30, 1996, the Company disposed of or terminated
operations at several small casinos and taverns as these operations were not
deemed to be compatible with the Company's long-term strategy. No revenues or
39
<PAGE> 40
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
expenses were reported for these properties in the fiscal year ended June 30,
1997. For the fiscal year ended June 30, 1996, revenues for these properties are
included in Casino Operations revenues and totaled $3.1 million. The related
costs of revenues are included in cost of Casino Operations and totaled $2.3
million. The related selling, general and administrative expenses totaled $1.1
million.
CONSOLIDATED
The following discussion of the Company's consolidated results of operations for
the year ended June 30, 1997 is presented in comparison to the actual
consolidated results of operations for the prior year which include the results
of operations of the Gaming Equipment and Systems and Wall Machines and
Amusement Games business units for only the last twelve days of the year ended
June 30, 1996.
Total revenues for the year ended June 30, 1997 were approximately $445.1
million, an increase of $272.7 million (158%) over revenues of $172.4 in prior
year. This increase is primarily due to the incremental revenues of $252.7
million from Gaming Equipment and System sales and Wall Machines and Amusement
Games sales, as well as the aforementioned increases in revenues at both the
Route Operations and Casino Operations business units.
Cost of revenues for the year ended June 30, 1997 were approximately $270.9, an
increase of $155.4 million (135%) compared to $115.5 in prior year. This
increase is due to the incremental cost of revenues of $143.7 million and from
Gaming Equipment and System sales and Wall Machines and Amusement Games sales,
as well as the aforementioned increases in cost of revenues at both the Route
Operations and Casino Operations business units.
Selling, general and administrative expenses for the year ended June 30, 1997
were approximately $100.4 million, an increase of $69.8 million (228%) compared
to costs of $30.6 for the prior year. This increase is due to the impact of
including the Gaming Equipment and Systems and the Wall Machines and Amusement
Games business units expenses for the entire year and higher legal and
professional fees in the current year, partially offset by cost savings such as
elimination of certain duplicative costs.
Provision for doubtful receivables for the year ended June 30, 1997 was $9.1
million, an increase of $8.1 million from the prior year. The increase was due
primarily to the impact of including the provisions related to the Gaming
Equipment and Systems and the Wall Machines and Amusement Games business units
for the entire year, as well as the aforementioned increase in the provision at
the Route Operations. Depreciation and amortization for the fiscal year ended
June 30, 1997 was $22.6 million, an increase of 105% compared to depreciation
and amortization of $11.0 million in the prior fiscal year. This increase is due
to the inclusion of Gaming Equipment and Systems and Wall Machine and Amusement
Game depreciation and amortization in the entire fiscal year, higher
depreciation and amortization in the Route Operations business unit and the
impact of amortizing goodwill and other intangibles resulting from the BGII
acquisition.
During the year ended June 30, 1996, the Company expensed direct acquisition
costs related to the acquisition of BGII, totaling $55.8 million. Such costs
included the $30.1 million non-cash, accounting loss on the debenture conversion
portion of the financing for the acquisition, plus legal, accounting, financial
advisory, printer, SEC filing fees and other related expenses.
During the year ended June 30, 1997, the Company incurred $0.7 million in
unusual items related primarily to separation costs of Alliance personnel
subsequent to the BGII acquisition. During the year ended June 30, 1996, the
Company incurred $5.5 million in unusual items including a provision of $3.4
million to fully reserve the net book value of assets that the Company deemed
impaired and the aforementioned unusual items at its Route Operations business
unit of $2.1 million.
40
<PAGE> 41
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
INTEREST INCOME AND EXPENSE AND INCOME TAXES
Net interest expense in the year ended June 30, 1997, increased to $22.0
million, an increase of 201% compared to the net interest expense of $7.3
million in the prior year. The increase is due primarily to interest on the
Company's 12 7/8% Senior Secured Notes due 2003 which were issued in June 1996,
partially offset by lower interest expense on the Company's 7 1/2% Convertible
Debentures due 2003, substantially all of which were converted into equity as
part of the financing of the BGII acquisition.
The Company recorded an income tax provision of $8.0 million in the year ended
June 30, 1997, compared to a provision of $0.8 million in the prior year. The
current year provision is due primarily to income taxes at Wall Machines and
Amusement Games and domestic state income taxes. The effective tax rate is 58%,
which resulted from taxable income currently being generated in Germany, which
has a higher effective rate than in the U.S. At June 30, 1997, the Company has
net operating loss carry forwards for federal income tax purposes of
approximately $21.5 million which are available to offset future federal taxable
income, if any, expiring in the years 2007 through 2011. At June 30, 1997 the
Company has foreign tax credit carry forwards of approximately $11.8 million and
alternative minimum tax credit (AMT) carry forwards of approximately $1.5
million. Foreign tax credits are available to offset future taxes due in the
U.S. on future foreign taxable income and expire between 1998 and 2002 unless
utilized prior to such time. AMT credits are available to be carried forward
indefinitely and may be utilized against regular U.S. corporate tax to the
extent it does not exceed computed AMT calculations. In addition, the Company's
annual limitation with respect to net operating losses is limited pursuant to
Section 382 of the Internal Revenue Code.
1996 COMPARED WITH 1995
General
The following discussion of the results of operations includes only the
Company's two business units that existed prior to the acquisition of BGII on
June 18, 1996. See the "Consolidated" section below for the impact of the BGII
results for the 12 days prior to 1996 year-end.
ROUTE OPERATIONS
Total revenues from Route Operations for the year ended June 30, 1996 were
approximately $109.9 million, an increase of $3.1 million (2.9%) over the prior
year. Revenues from Nevada route operations increased approximately $1.8 million
(2.0%) over the prior year. This increase was attributable to an increase in the
average net win per gaming machine per day from $47.70 in the prior year to
$48.60 in the current year and an increase in the weighted average number of
gaming machines during the current year to 5,290 units as compared to 5,260
units in the prior year. During the year ended June 30, 1996 the Company
received regulatory approval for its Gambler's Bonus product, and began
installation into locations in Southern Nevada. The revenues at locations in
which the Gambler's Bonus product has not been installed experienced a slight
decrease in revenues in comparison to the prior year. Revenues from route
operations in Louisiana increased $1.3 million (8.4%) primarily as a result of
an expansion of operations from the opening of a new OTB parlor in October 1995.
In addition, Louisiana revenues increased as a result of an improvement in the
net win per gaming machine per day from $56.40 in the prior year to $68.50 in
the current year, which resulted from higher revenues earned on a lower average
number of machines. The average number of gaming machines in the Louisiana route
operations decreased from 720 for the prior year to 680 for the current year.
Cost of revenues for Route Operations for the year ended June 30, 1996 totaled
$84.2 million, an increase of $4.3 million (5.4%) over the prior year. Cost of
revenues for Nevada route operations increased $3.5 million (5.4%) as compared
to the prior year and increased slightly as a percent of related revenues due
primarily to increased costs associated with new and renewed contracts. Costs of
revenues for route operations in Louisiana increased $0.8 million (7.6%)
primarily as a result of the increase in revenues. As a percent of related
revenues, cost of revenues for Route
41
<PAGE> 42
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
Operations in Louisiana remained relatively constant, at approximately 63.8%.
Cost of route revenues for Route Operations includes rents under both space
lease and revenue sharing arrangements, gaming taxes and direct labor, including
related payroll taxes and benefits.
In the year ended June 30,1996, Nevada route operations incurred unusual items
totaling $2.1 million. Reserves were increased by $1.4 million for certain parts
inventories which became obsolete and were subsequently disposed of due to the
impact of recent technological changes to gaming devices being deployed as a
result of the new Gambler's Bonus product. In addition an accrual of $0.7
million was established to reserve for the present value of the future lease
payments for one small casino location for which cash flows received under the
participation agreement are currently inadequate to service the building lease
paid by the Company.
For the year ended June 30, 1996, the Route Operations business unit reported
operating income of $13.1 million, an increase of 7% compared to operating
income of $12.2 million in the prior year. The operating income improvement
resulted from the aforementioned increase in revenues partially offset by a
slight increase in operating costs as a percentage of revenues. Selling, general
and administrative expenses related to Route Operations for the current year
remained relatively flat from the prior year.
CASINO OPERATIONS
Revenues from Casino Operations for the year ended June 30, 1996 were
approximately $45.4 million (excluding revenues of closed casinos and taverns as
discussed below), an increase of $27.1 million or 149.3% from the prior year.
This increase is due primarily to the impact of the Rainbow Casino in Vicksburg,
Mississippi. Due to a change in Rainbow Casino's ownership structure on March
29, 1995, the Company began consolidating the results of the Rainbow Casino and
thus the prior year included only three months of the Rainbow Casino results of
operations. The current year results reflect twelve months of Rainbow Casino
operations plus the impact of having all of the amenities of the facility in
operation for the full year. Rainbow Casino revenues were $33.9 million for the
current year compared to $7.6 million in the prior year. During the
approximately nine-month period ended March 29, 1995, the Company recorded
royalty income from the Rainbow Casino of $0.9 million, and such royalty was
terminated upon the change in ownership referred to above. Revenues from the
Rail City Casino were relatively flat at $11.5 million, resulting from lower
patronage during the first six months of the current year during which there was
significant road construction near the property offset by increased revenues
from improved casino ambiance after the completion of an internal remodeling
project and a successful series of marketing campaigns to attract local patrons
back to the casino after completion of the nearby road construction.
The cost of revenues for Casino Operations for the year ended June 30, 1996,
including costs of food and beverage revenues, were approximately $19.8 million,
an increase of $9.6 million or 94.6% compared to the prior year. The increase is
primarily due to the aforementioned impact of the Rainbow Casino operations. The
cost of revenues at the Rail City Casino were relatively flat at $7.4 million.
Cost of casino revenues includes cost of goods sold, gaming taxes, rent and
direct labor, including related taxes and benefits.
For the year ended June 30, 1996, the Casino Operations business unit reported
operating income, net of casino royalty, of $9.4 million, an increase of 261%,
compared to operating income of $2.6 million in the prior year. The operating
income improvement resulted from the aforementioned impact of the Rainbow Casino
operations, partially offset by higher selling, general and administrative costs
at the Rail City Casino primarily for the marketing campaigns to attract local
patrons back to the casino after completion of the nearby road construction. The
Rainbow Casino royalty fees incurred during the year ended June 30, 1996 totaled
$4.1 million.
REVENUES AND EXPENSES FOR CLOSED CASINOS AND TAVERNS
During the years ended June 30, 1995 and 1996 the Company disposed of or
terminated operations at several small casinos and taverns, as these operations
were not deemed to be compatible with the Company's long-term strategy. Revenues
for these properties are included in casino revenues and totaled $6.1 million
and $3.1 million for the years ended June 30, 1995 and 1996, respectively and
the related costs of revenues are included in casino cost of revenues
42
<PAGE> 43
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
and totaled $4.1 million and $2.3 million for such periods, respectively. The
related selling, general and administrative expenses totaled $1.8 million and
$1.1 million for the years ended June 30, 1995 and 1996, respectively.
CONSOLIDATED
Total revenues for the year ended June 30, 1996 were approximately $172.4
million, an increase of $40.4 million (30.6%) over fiscal year 1995. This
increase is due to Gaming Equipment and Systems and Wall Machines and Amusement
Games revenues of $13.9 million during the post-acquisition period as well as
the aforementioned increases in revenues at both the Route Operations and Casino
Operations business units.
Cost of revenues for the year ended June 30, 1996 increased to $115.5 million
(22.7%) over the prior year due to Gaming Equipment and Systems and Wall
Machines and Amusement Games cost of revenues of $9.2 million during the
post-acquisition period as well as the aforementioned increases in cost of
revenues at both the Route Operations and Casino Operations business units. The
total cost of revenues as a percentage of total revenues, including those of
Gaming Equipment and Systems and Wall Machines and Amusement Games in the
post-acquisition period improved by 4.1% compared to the prior year.
Selling, general and administrative expenses for the year ended June 30, 1996
were approximately $30.6 million, an increase of $2.4 million (8.5%) from the
prior year. After excluding the prior year unusual item of compensation expense
of $1.3 million, the increase was primarily due to Gaming Equipment and Systems
and Wall Machines and Amusement Games selling, general and administrative
expenses of $2.0 million during the post-acquisition period as well as the
aforementioned increases at the Casino Operations business unit.
Provision for doubtful receivables for the year ended June 30, 1996 increased
$0.6 million from the prior year. The increase was due primarily to a $0.4
million provision for specifically identified bad debt accounts in the Company's
Route Operations business unit and the impact of including Gaming Equipment and
Systems and the Wall Machines and Amusement Games business units provisions in
the post-acquisition period of $0.2 million.
During the years ended June 30, 1995 and 1996, the Company expensed direct
acquisition costs of $1.7 million and $55.8 million, respectively. Such costs
for the 1996 year include the $30.1 million non-cash, accounting loss on the
debenture conversion portion of the financing for the BGII acquisition, plus
legal, accounting, financial advisory, printer, SEC filing fees and other
related expenses.
During the year ended June 30, 1996, the Company incurred $5.5 million in
unusual items, including a provision of $3.4 million to fully reserve the net
book value of assets that the Company deemed impaired and the aforementioned
unusual items at its Route Operations business unit of $2.1 million.
INTEREST INCOME AND EXPENSE AND INCOME TAXES
In the year ended June 30, 1996, interest income decreased $1.2 million from the
prior year to $1.6 million, resulting from a decline in the level of cash
invested during the 1996 year. In the 1996 year, interest expense increased $0.8
million from the prior year to $8.9 million. This increase was a result of the
aforementioned impact of consolidating the Rainbow Casino results of operations
for the full twelve months in the 1996 year, plus additional borrowings at the
Rainbow Casino to complete the facility, and, to a lesser extent, the interest
expense associated with the Senior Secured Notes, offset by the reduction in
interest associated with the $83.4 million of the convertible debentures which
converted into equity instruments.
The provision for income taxes in the year ended June 30, 1996 year increased
$0.5 million from the prior year to $0.8 million. This increase was a result of
a provision for alternative minimum tax due to the taxable nature of the
conversion of the Company's old convertible debentures for new convertible
debentures in the exchange offer, increased state income taxes in Louisiana and
the tax effects related to the accounting for unrealized gains and losses on the
BGII stock classified for accounting purposes as available for sale prior to
consummation of the BGII acquisition.
43
<PAGE> 44
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
RISK FACTORS
This Annual Report on Form 10-K and the Company's other filings with the
Securities and Exchange Commission may contain forward-looking statements. Set
forth below are certain important factors that could cause actual results to
differ materially from those in such statements.
HIGH LEVERAGE; ABILITY TO SERVICE DEBT
After the completion of the Refinancing, the Company has a substantially
increased amount of indebtedness. As of June 30, 1997, after giving effect to
the Refinancing, the aggregate outstanding principal amount of the Company's
long-term indebtedness including current maturities would have been $302.6
million, versus long-term indebtedness including current maturities prior to the
Refinancing of $173.8 million. Following the Refinancing, the Company also has
available to it up to $90.0 million in borrowing capacity under the Revolving
Credit Facility, of which $14.5 million was used to repay outstanding
indebtedness under existing credit lines. On a pro forma basis after giving
effect to the Refinancing (assuming the Refinancing occurred June 30, 1996) and
the use of proceeds thereof, the Company's ratio of earnings to fixed charges
(excluding the imputed fixed charges for contingent rental expense related to
revenue-sharing agreements in its Route Operations of approximately $23.0
million annually) would have been 1.4x for the year ended June 30, 1997. On a
pro forma basis, the Company would have had a net capital deficiency at June 30,
1997 of $24.9 million, reflecting a reduction in paid-in capital of $16.4
million for the difference between liquidation value and book value for the
Series B Preferred Stock and a larger accumulated deficit resulting from the
$19.0 million Rainbow Royalty Buyout, the premium on the redemption of the 12
7/8% Notes, write-off of the deferred financing costs and initial discount
related to the 12 7/8% Notes and a portion of the fees and expenses of the
Refinancing.
The new credit facility and the indenture contain a number of significant
covenants that, among other things, restrict the ability of the Company and
certain of its subsidiaries to dispose of assets, incur additional indebtedness
and issue preferred stock, pay dividends or make other distributions, enter into
certain acquisitions, repurchase equity interests (as defined) or subordinated
indebtedness, issue or sell equity interests of the Company's subsidiaries (as
defined), engage in mergers or consolidations, or engage in certain transactions
with subsidiaries and affiliates and otherwise restrict corporate activities.
There can be no assurance that such restrictions will not adversely affect the
Company's ability to finance its future operations or capital needs or engage in
other business activities that may be in the interest of the Company. In
addition, the new credit facility also requires the Company to maintain
compliance with certain financial ratios. The ability of the Company to comply
with such ratios may be affected by events beyond the Company's control. A
breach of any of these covenants or the inability of the Company to comply with
the required financial ratios could result in a default under the new credit
facility. In the event of any such default, the lenders under the new credit
facility could elect to declare all borrowings outstanding under the new credit
facility, together with accrued interest and other fees, to be due and payable,
to require the Company to apply all of its available cash to repay such
borrowings or to prevent the Company from making debt service payments on the
Senior Subordinated Notes, any of which would be an event of default under the
Senior Subordinated Notes. If the Company were unable to repay any such
borrowings when due, the lenders could proceed against their collateral. If the
indebtedness under the new credit facility or the Notes were to be accelerated,
there can be no assurance that the assets of the Company would be sufficient to
repay such indebtedness in full.
The Company's obligations to make principal and interest payments on outstanding
indebtedness, and to comply with the covenants in the Indenture and the
agreements governing borrowings under the new credit facility, will have several
important effects on its future operations including the following: (i) the
portion of the Company's cash flow from operations which will be dedicated to
the payment of principal and interest on its indebtedness will not be available
for other purposes; (ii) certain of the Company's borrowings are at variable
rates of interest, which could result in higher expense in the event of
increases in interest rates; (iii) the Company may be more vulnerable to
downturns in its business or in the general economy and may be restricted from
making acquisitions, introducing
44
<PAGE> 45
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
new technologies or exploiting business opportunities; and (iv) the Company's
ability to obtain additional financing in the future for working capital,
capital expenditures, general corporate or other purposes may be impaired.
Additionally, the Company's ability to meet its debt service obligations and to
reduce its total debt will be dependent upon the Company's future performance,
which will be subject to general economic and regulatory conditions and to
financial, business and other factors affecting the operations of the Company,
many of which are beyond its control.
No assurance can be given that the Company will be able to generate the cash
flow necessary to permit the Company to meet its fixed charges and repayment
obligations. Any inability of the Company to service its fixed charges and
repayment obligations would have a significant adverse effect on the Company.
OPERATING HISTORY--RECENT LOSSES
The Company incurred net losses of $10.8 million and $59.9 million (including
$55.8 million of costs related to the BGII acquisition) for its fiscal years
ended June 30, 1995 and 1996, respectively, and net income of $5.8 million for
the fiscal year ended June 30, 1997. In conjunction with the Refinancing, the
Company incurred fees, expenses and charges totaling approximately $78.4
million, including the premium on the repurchase of the 12 7/8% notes of $27.7
million and $16.4 million for the difference between the carrying value and the
liquidation value of the Series B Preferred Stock, which will be recorded in the
quarter ended September 30, 1997. There can be no assurance that the Company
will be profitable, and that there will not be similar or other unusual or
non-recurring charges, in the future.
COMPETITION
Gaming Equipment and Systems. The market for gaming machines is extremely
competitive, and there are a number of established, well-financed and well-known
companies producing machines that compete with each of Gaming's product lines in
each of Gaming's markets. The domestic market for gaming machines is dominated
by a single competitor, International Game Technology ("IGT"), with a number of
smaller competitors in the field. In addition, certain technology-oriented
companies have recently entered or may enter the gaming machine market.
Management believes that some of these competitors have greater capital
resources than the Company. Competition among gaming machine manufacturers,
particularly with respect to sales of gaming machines into new and emerging
markets, is based on competitive customer pricing and financing terms, appeal to
the player and quality of the product, and having an extensive distribution and
sales network. Sales to established casinos in Nevada normally require
completion of a successful trial period for the machines in the casino.
The competition for the computerized monitoring systems designed and sold by
Systems currently consists of IGT, Casino Data Systems and, to a lesser extent,
Acres Gaming, Inc., Gaming Systems International, Inc. and Mikohn Gaming
Corporation. Competition is keen in this market due to the number of providers
and the limited number of casinos and the jurisdictions in which they operate.
Pricing, product feature and function, accuracy, and reliability are all main
factors in determining a provider's success in selling its system. Systems
believes the future success of its operations will be determined by its ability
to bring new and innovative products to the marketplace while at the same time
maintaining the base of loyal existing customers.
Wall Machines and Amusements Games. Germany's wall machine manufacturing
industry is dominated by Bally Wulff and two of its competitors. Management
believes these three entities collectively account for more than 90% of the
entire market for wall machines (which exists almost exclusively in Germany).
Bally Wulff's two major competitors have greater resources than the Company and
own and operate a significant number of arcades, which gives them a competitive
advantage arising from a built-in market for their games and the ability to test
market new games in their own arcades. In addition, wall machines compete for
floor space in arcades with token machines, which are not subject to the strict
German licensing requirements governing wall machines.
45
<PAGE> 46
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
Route Operations. The competition for obtaining and renewing route contracts in
Nevada is high and continues to intensify. Such competition has, over time,
reduced the Company's gross profit margins for such operations. In addition,
such competition has required the Company to provide financial incentives to
retain or obtain certain route locations. Such incentives include long-term
lease commitments, guarantees of leases in favor of owners of local
establishments, substantial advance deposits, payments of lease rentals in
advance and loans for buildings and tenant-improvement costs. Although the
Company believes that it now has adequate procedures for evaluating and managing
such risks, historically substantial losses have been incurred in connection
with such transactions reflecting, in part, former management's willingness to
accept higher levels of risk to further its policy of emphasizing market share.
Notwithstanding the change in the Company's business strategy to one emphasizing
profitability rather than market share, the future success of the Company's
Route Operations will continue to be dependent to some extent on its ability and
willingness to provide such financial inducements. Although the Company has
historically generated sufficient new route contracts to offset the loss of old
route contracts, due to increased competition, the increased sophistication and
bargaining power of customers and possibly other factors not yet known, there
can be no assurance that the Company will be able to obtain new route contracts
or renew or extend its route contracts upon their expiration or termination, or
that, if renewed or extended, the terms will be favorable to the Company. In
Louisiana, the Company's Route Operations at the racetrack and OTBs compete with
various truck stops and locations with liquor licenses throughout the New
Orleans area, as well as riverboat gaming and one land-based casino which may
re-open in New Orleans.
Casino Operations. The operation of casinos is also a highly competitive
business. The principal competitive factors in the industry include the quality
and location of the facility, the nature and quality of the amenities and
customer services offered and the implementation and success of marketing
programs. In Sparks, Nevada, the principal competition for the Company's
operations comes from larger casinos focusing on the local market. The Company's
Rainbow Casino in Vicksburg, Mississippi faces intense direct competition from
other gaming facilities serving this market. Competition from casinos in nearby
locations may also be reducing the market area from which Vicksburg casinos draw
most of their patrons. Moreover, additional potential gaming sites remain in and
around Vicksburg and Sparks; some of these sites may be closer to larger
population centers and, if developed, might enjoy a competitive advantage over
the Company's casinos.
PRODUCT DEVELOPMENT
The future success of the Company depends to a large extent upon its ability to
design, manufacture and market technologically sophisticated products that
achieve high levels of player acceptance. The development of a successful new
product or product design by a competitor could adversely affect sales of the
Company's products and force it to respond quickly with its own competing
products. The Company's plans with respect to the introduction of more
sophisticated technology into the electronic gaming machine market are designed
to lead to an increase in market share and profitability for the Company.
However, there is no assurance that any such products will be developed, or that
if developed they will receive necessary regulatory approvals or be commercially
successful.
SALES TO NON-TRADITIONAL GAMING MARKETS
The continued growth of the non-traditional markets outside of Nevada and
Atlantic City for electronic gaming machines is contingent upon the public's
acceptance of these markets and an ongoing regulatory approval process by
Federal, state and local governmental authorities. The Company cannot predict
which new jurisdictions or markets, if any, will approve the operation of
electronic gaming machines, the timing of any such approval or the level of the
Company's participation in any such markets or that jurisdictions currently
permitting gaming will continue to do so in the future.
FOREIGN OPERATIONS
46
<PAGE> 47
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
The Company's business in foreign markets is subject to the risks customarily
associated with such activities. These risks include fluctuations in foreign
currency exchange rates and controls, expropriation, nationalization and other
economic, tax and regulatory policies of local governments as well as the laws
and policies of the United States affecting foreign trade and investment. The
Company does not generally enter into foreign exchange contracts to hedge its
exposure to foreign exchange rate fluctuations. In addition, the proposed
conversion of currency in Germany from the Deutschemark to the Euro will require
the Company to redesign new and, possibly, existing Bally Wulff wall machines
and gaming devices to accept such new currencies, the financial impact of which
is uncertain.
DEPENDENCE ON KEY PERSONNEL
The success of the Company will be dependent, to a significant extent, upon the
continued services of a relatively small group of executive personnel. The loss
or unavailability of one or more of such executive officers or the inability to
attract or retain key employees in the future could have an adverse effect upon
the Company's operations. In December 1996, the Company's President and Chief
Executive Officer stepped down as the Company's strategic direction changed
after the BGII acquisition. In June, 1997, the Company named Morris Goldstein as
its President and Chief Executive Officer.
STRICT REGULATION BY GAMING AUTHORITIES
The manufacture and distribution of gaming machines and the conduct of gaming
operations is subject to extensive Federal, state, local and foreign regulation
by various gaming authorities (each, a "Gaming Authority"). Although the laws
and regulations of the various jurisdictions in which the Company operates vary
in their technical requirements and are subject to amendment from time to time,
virtually all these jurisdictions require licenses, permits, documentation of
the qualification, including evidence of integrity and financial stability, and
other forms of approval for companies engaged in gaming operations and the
manufacture and distribution of gaming machines as well as for the officers,
directors, major stockholders and key personnel of such companies. The Company
and its key personnel have obtained, or applied for, all government licenses,
registrations, findings of suitability, permits and approvals necessary for the
manufacture and distribution, and operation where permitted, of its gaming
machines in the jurisdictions in which it currently does business. However,
there can be no assurance that such licenses, registrations, findings of
suitability, permits or approvals will be given or renewed in the future or that
the Company will obtain the licenses necessary to operate in emerging markets.
Gaming was previously licensed by the New Jersey Commission as a gaming-related
casino service industry, which is required by the New Jersey Casino Control Act
in order for the Company to sell gaming devices and systems in New Jersey. Due
to the change of ownership of Gaming as a result of the BGII acquisition,
Gaming's New Jersey license was invalidated. Prior to the change of ownership of
Gaming and in anticipation of same, the Company submitted an application for
casino service industry licensure. The New Jersey Commission deemed the
application complete and, as a result, since the BGII acquisition the Company's
operations in New Jersey have continued uninterrupted pursuant to transactional
waivers which have been granted by the New Jersey Commission on a six-month
blanket basis for parts and service and on a sale-by-sale basis for all other
products pending final action on the Company's license application.
The Company's business is dependent on regulatory requirements. For example,
recurring demand exists for Bally Wulff's products because German regulations
limit the permissible use of wall machines to a period of four years. A change
in applicable regulations could adversely affect the market for the Company's
products and services.
The Company currently has an agreement with Fair Grounds Corporation, Jefferson
Downs Corporation and Finish Line Management Corporation to be the exclusive
operator of video poker machines at the only racetrack and ten associated OTBs
in the greater New Orleans area. On November 5, 1996 voters in Louisiana
approved a proposition to allow video poker to continue in six of the seven
parishes in which the Company operates off-track betting locations in the
greater New Orleans area. In addition, voters approved video poker in three
parishes in the
47
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ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
greater New Orleans area where the Company currently does not operate. In the
one parish in which the Company operates where video poker was voted down, the
Company will be allowed to continue to conduct business through June 30, 1999.
For the nine months ended March 31, 1997, the two off-track betting locations in
this parish accounted for $1.7 million of revenues and approximately 11% of
operating income of the Company's Route Operations in Louisiana or approximately
1% of the Company's operating income. These operations also depend on the
financial viability of the racetrack, which is beyond the control of the
Company. See "Business--Gaming Regulations and Licensing".
GAMING TAXES AND VALUE ADDED TAXES
Gaming operators are typically subject to significant taxes and fees in addition
to corporate income taxes, and such taxes and fees are subject to increase at
any time. Any material increase in these taxes or fees, which could occur
prospectively or retroactively, would adversely affect the Company. Sales of
Bally Wulff's products in Germany are generally subject to value added taxes
("V.A.T."). The operations of Bally Wulff had benefitted from a special tax
rebate that was phased out from January 1, 1992 to January 1, 1994. During 1995,
Bally Wulff increased the amount of V.A.T. reserves by $1.0 million as a result
of developments to date in an ongoing quadrennial audit of Bally Wulff's tax
returns for the years 1988 through 1991. The German tax authorities have
proposed preliminary adjustments which range from approximately $1.4 million
(which has been accrued) to approximately $5.0 million. The German Federal
Constitutional Court recently let stand a regulation that permits local
municipalities to impose additional taxes on gaming machine operators. In the
past, the imposition of such taxes by certain municipalities has adversely
affected Bally Wulff's sales. There can be no assurance that municipalities will
not impose new taxes or raise existing taxes in the future.
The Company pays and expects to continue to pay substantial taxes and fees in
Nevada, Louisiana and Mississippi and expects to pay substantial taxes and fees
in any other jurisdiction in which it conducts gaming operations. There can be
no assurance as to future increases in taxation on gaming operations.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control (as defined), each holder of the
Senior Subordinated Notes may require the Company to repurchase the Senior
Subordinated Notes held by such holder at 101% of the principal amount thereof,
plus accrued interest to the date of repurchase. The new credit facility
prohibits the Company from purchasing any Senior Subordinated Notes, and
provides that the occurrence of certain change of control events with respect to
the Company would constitute a default thereunder. In the event of a change of
control, the Company must offer to repay all borrowings under the new credit
facility or obtain the consent of its lenders under the credit agreement to the
purchase of Senior Subordinated Notes. If the Company does not obtain such a
consent or repay such borrowings, the Company will remain prohibited from
purchasing Senior Subordinated Notes. In such case, the Company's failure to
repurchase tendered Senior Subordinated Notes would constitute a default under
the indenture, which, in turn, would constitute a default under the new credit
facility. There can be no assurance that the Company will have the financial
ability to purchase the Senior Subordinated Notes upon the occurrence of a
change of control. There can be no assurance that the Company will be able to
comply with all of its obligations under the new credit facility, the indenture,
and its other indebtedness upon the occurrence of a change of control.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's Consolidated Financial Statements, including the notes thereto,
and supplementary financial information are listed in Part IV, Item 14, of this
Report and included after the signature page beginning at page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
48
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ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated by reference from the
Proxy Statement which will be filed with the Securities and Exchange Commission
within 120 days of the end of the Company's fiscal year covered by this report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the
Proxy Statement which will be filed with the Securities and Exchange Commission
within 120 days of the end of the Company's fiscal year covered by this report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference from the
Proxy Statement which will be filed with the Securities and Exchange Commission
within 120 days of the end of the Company's fiscal year covered by this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference from the
Proxy Statement which will be filed with the Securities and Exchange Commission
within 120 days of the end of the Company's fiscal year covered by this report.
49
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ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) Documents filed as part of this report: PAGE
----
<S> <C>
1. Financial Statements:
Independent Auditors' Report F-1
Consolidated Balance Sheets as of June 30, 1996 and 1997 F-2
Consolidated Statements of Operations for the Years Ended
June 30, 1995, 1996 and 1997 F-3
Consolidated Statements of Stockholders' Equity for the
Years Ended June 30, 1995, 1996 and 1997 F-4
Consolidated Statements of Cash Flows for the Years
Ended June 30, 1995, 1996 and 1997 F-5
Notes to Consolidated Financial Statements F-6
2. Consolidated Supplemental Schedules:
Not applicable.
3. Exhibits:
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
2.1 Agreement and Plan of Merger among Alliance, BGII Acquisition Corp. and
BGII, dated as of October 18, 1995, as amended and restated
(incorporated herein by reference to Annex I to the prospectus included
in Alliance's Form S-4, Registration Number 333-02799 ).
2.2 Basic Agreement, dated as of October 29, 1993, among United Gaming,
Inc., The Rainbow Casino Corporation, John A. Barrett, Jr. and Leigh
Seippel, and exhibits thereto (incorporated herein by reference to
Alliance's Form 8-K dated October 29, 1993).
2.4 Consolidation Agreement, dated March 29, 1995 among United Gaming
Rainbow, Inc., RCC, RCVP, NGM, HFS, National Gaming Corporation,
Rainbow Development Corporation and Leigh Seippel and John A. Barrett,
Jr. (incorporated herein by reference to Alliance's Form 8-K dated
March 29, 1995).
3.1 Restated Articles of Incorporation of the Registrant, as amended
(incorporated herein by reference to Exhibit 3.1 to Alliance's Form
S-2, Registration Number 33-72990).
</TABLE>
50
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ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
3.2 Revised By-Laws of the Registrant (incorporated herein by reference to
Alliance's Form 10-K for the year ended June 30, 1994.)
3.4 Certificate of Designations, Preferences, and Relative, Participating,
Optional and Other Special Rights of Special Stock and Qualifications,
Limitations and Restrictions of 11 1/2% Non-Voting, Pay-in-Kind Special
Stock, Series E (incorporated herein by reference to Exhibit 9(c)(5) to
Amendment No. 1 to Alliance's Schedule E-4 dated May 9, 1996).
4.1 Form of Indenture among the Company, certain Guarantors referred to
therein and United States Trust Company of New York, as Trustee, in
respect of Alliance's 10% Senior Subordinated Notes due 2007 (including
form of Senior Subordinated Note and Guarantee).
The Registrant agrees to furnish to the Commission upon request copies
of agreements with respect to its other long-term debt.
4.3 Credit Agreement among Alliance Gaming Corporation, Bally Wulff
Vertriebs GmbH, Bally Wulff Automaten GmbH and various lenders, and
Credit Suisse First Boston, dated August 8, 1997.
10.1 Loan and Warrant Agreement dated March 24, 1993 between United Gaming,
Inc., Video Services, Inc. and Alfred H. Wilms (incorporated herein by
reference to Alliance's Form 8-K dated March 31, 1992).
10.4 Alliance Gaming Corporation 1996 Long Term Incentive Plan (incorporated
herein by reference to Alliance Form S-8 filed August 12, 1997).*
10.5 Letter of Agreement dated June 25, 1993 among United Gaming, Inc. and
Kirkland-Ft. Worth Investment Partners, L.P., Kirkland Investment
Corporation and as to certain provisions, Alfred H. Wilms, including
Exhibit A (Form of Securities Purchase Agreement), Exhibit B (Form of
Stockholders Agreement), Exhibit C (Form of Certificate of Designations
of Non-Voting Junior Convertible Preferred Stock), Exhibit D (Form of
Warrant Agreement), and Exhibit E (Form of press release) thereto
(incorporated herein by reference to Alliance's Form 8-K dated June 25,
1993).
10.6 Advisory Agreement, dated June 25, 1993 among United Gaming, Inc.,
Gaming Systems Advisors, L.P. and, as to certain provisions, Mr. Alfred
H. Wilms, including Exhibit A (Form of Warrant Agreement) and Exhibit B
(Form of press release) thereto (incorporated herein by reference to
Alliance's Form 8-K dated June 25, 1993).
</TABLE>
51
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ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
10.7 United Gaming, Inc. 1991 Long-Term Incentive Stock Option Plan
(incorporated herein by reference to Alliance's Form S-8 Registration
Number 33-45811 and Registration Number 33-75308).*
10.8 Gaming and Technology, Inc. 1984 Employee Stock Option Plan
(incorporated herein by reference to Alliance's Form S-8 Registration
Number 2-98777).*
10.9 Agreement, dated as of September 14, 1993, by and among United Gaming,
Inc., Kirkland-Ft. Worth Investments Partners, L.P., Kirkland
Investment Corporation, Gaming Systems Advisors, L.P. and Alfred H.
Wilms (incorporated herein by reference to Alliance's Form 8-K dated
September 21, 1993).
10.10 Warrant Agreement, dated as of September 21, 1993, by and between
United Gaming, Inc. and Kirkland-Ft. Worth Investment Partners, L.P.
relating to warrants to purchase 2.75 million shares of Common Stock
(incorporated herein by reference to Alliance's Form 8-K dated
September 21, 1993).
10.11 Warrant Agreement, dated as of September 21, 1993, by and between
United Gaming, Inc. and Gaming Systems Advisors, L.P. relating to
warrants to purchase 1.25 million shares of Common Stock (incorporated
herein by reference to Alliance's Form 8-K dated September 21, 1993).
10.12 Stockholders Agreement, dated as of September 21, 1993, by and among
United Gaming, Inc., Kirkland-Ft. Worth Investment Partners, L.P., and
Alfred H. Wilms (incorporated herein by reference to Alliance's Form
8-K dated September 21, 1993).
10.13 Amendment to Stockholders Agreement dated as of October 20, 1994
(incorporated herein by reference to Alliance's Form S-8 Registration
Number 33-45811 and Registration Number 33-75308).
10.14 Selling Stockholder Letter Agreement dated as of March 20, 1995
(incorporated herein by reference to Alliance's Form S-3 Registration
Number 33-58233).
10.15 Securities Purchase Agreement, dated as of September 21, 1993, by and
among United Gaming, Inc., Kirkland-Ft. Worth Investment Partners, L.P.
and Kirkland Investment Corporation (incorporated herein by reference
to Alliance's Form 8-K dated September 21, 1993).
10.19 Management Agreement, dated as of October 29, 1993, among Rainbow
Casino-Vicksburg Partnership, L.P., The Rainbow Casino Corporation and
Mississippi Ventures, Inc., as manager (incorporated herein by
reference to Alliance's Form 8-K dated October 29, 1993).
10.22 Warrant Agreement, dated as of August 2, 1993, between United Gaming,
Inc. and Alfred H. Wilms (incorporated herein by reference to
Alliance's Form S-2, Registration Number 33-72990).
10.27 Letter Agreement, dated as of February 25, 1994, among United Gaming,
Inc., The Rainbow Casino Corporation, John A. Barrett, Jr. and Leigh
Seippel (incorporated herein by reference to Alliance's Form 8-K dated
March 15, 1994).
10.28 Letter Agreement, dated as of June 29,1994, among United Gaming, Inc.,
The Rainbow Casino
</TABLE>
52
<PAGE> 53
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
Corporation, John A. Barrett, Jr. and Leigh Seippel, consented to by
HFS Gaming Corporation (incorporated herein by reference to Alliance's
Form 8-K dated August 11, 1994).
10.29 Letter Agreement, dated as of July 16, 1994, among United Gaming, Inc.,
The Rainbow Casino Corporation, John A. Barrett, Jr. and Leigh Seippel,
consented to by HFS Gaming Corporation (incorporated herein by
reference to Alliance's Form 8-K dated August 11, 1994).
10.30 Second Amendment to Casino Financing Agreement, dated as of August 11,
1994, among United Gaming, Inc., United Gaming Rainbow, Inc., Rainbow
Casino-Vicksburg Partnership, L.P., The Rainbow Casino Corporation,
John A. Barrett, Jr., Leigh Seippel and HFS Gaming Corporation
(incorporated herein by reference to Alliance's Form 8-K dated August
11, 1994).
10.31 Partnership Agreement of Rainbow Casino-Vicksburg Partnership, L.P.,
dated as of July 8, 1994 (incorporated herein by reference to
Alliance's Form 8-K dated August 11, 1994).
10.32 Second Amended and Restated Agreement of Limited Partnership, dated
March 29,1995, between United Gaming Rainbow and RCC (incorporated
herein by reference to Alliance's Form 8-K dated March 29, 1995).
10.33 Promissory Note, dated as of July 16, 1994, from United Gaming Rainbow,
Inc. to The Rainbow Casino Corporation (incorporated herein by
reference to Alliance's Form 8-K dated August 11, 1994).
10.34 Pledge Agreement, dated as of July 16, 1994, from United Gaming
Rainbow, Inc. to The Rainbow Casino Corporation (incorporated herein by
reference to Alliance's Form 8-K dated August 11, 1994).
10.36 Escrow Agreement, dated as of August 11, 1994, among United Gaming
Rainbow, Inc., The Rainbow Casino Corporation, John A. Barrett, Jr.,
Leigh Seippel and Butler, Snow, O'Mara, Stevens & Cannada, together
with Agreement dated February 7, 1995, as amended July 11, 1994 between
Rainbow Casino-Vicksburg Partnership, L.P. and the City of Vicksburg,
Mississippi (incorporated herein by reference to Alliance's Form 8-K
dated August 11, 1994).
10.42 Agreement, dated March 20, 1995, between Alliance and Joel Kirschbaum
(incorporated herein by reference to Alliance's Form S-3 Registration
Number 33-58233).*
10.43 Letter Agreement, dated March 29, 1995, among United Gaming Rainbow,
RCC, Leigh Seippel, John A. Barrett, Jr. and Butler, Snow, O'Mara,
Stevens & Cannada (incorporated herein by reference to Alliance's Form
8-K dated March 29, 1995).
10.44 Class A Note Payable, dated March 29, 1995, issued by RCVP to United
Gaming Rainbow (incorporated herein by reference to Alliance's Form 8-K
dated March 29, 1995).
10.45 Class B Note Payable, dated March 29, 1995, issued by RCVP to United
Gaming Rainbow (incorporated herein by reference to Alliance's Form 8-K
dated March 29, 1995).
10.46 Class B Note Payable, dated March 29, 1995, issued by RCVP to National
Gaming Mississippi, Inc. (incorporated herein by reference to
Alliance's Form 8-K dated March 29, 1995).
</TABLE>
53
<PAGE> 54
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
10.49 Agreement, dated March 31, 1995 between Anthony DiCesare and Alliance
Gaming Corporation (incorporated by reference to exhibit 10.54 to Form
S-2 registration statement, registration Number 333-02147).*
10.50 Trademark License Agreement, dated November 11, 1991 between Bally
Manufacturing Corporation and Bally Gaming International, Inc.
(incorporated herein by reference to exhibit 10(i)(d) included in
BGII's Annual Report on Form 10-K for the fiscal year ended December
31, 1991).
10.51 Amended and Restated Trademark License Agreement, dated July 8, 1992,
by and between Bally Gaming International, Inc. and Bally Manufacturing
Corporation (incorporated herein by reference to exhibit 10(i)(d)
included in BGII's Registration Statement on Form S-1 No. 33-48347
filed on July 9, 1992).
10.53 Second Amendment to Trademark License Agreement and Settlement
Agreement, dated March 31, 1995, by and between Bally Entertainment
Corporation and Bally Gaming International, Inc. (incorporated herein
by reference to Exhibit I, included in BGII's Current Report on Form
8-K dated April 3, 1995).
10.54 Third Amendment to Trademark License Agreement and Settlement
Agreement, dated May 10, 1996, by and between Bally Entertainment
Corporation, Alliance Gaming Corporation and BGII Acquisition Corp.
(incorporated by reference to exhibit 10.77 to S-2 Registration
Statement No. 333-02147).
10.55 1991 Incentive Plan of Bally Gaming International, Inc. (incorporated
herein by reference to exhibit 10(iii)(a) included in BGII's
Registration Statement No. 33-42227 on Form S-1, effective November 8,
1991).*
10.56 Amendment No. 1 to the 1991 Incentive Plan of Bally Gaming
International, Inc. effective February 6, 1993 (incorporated herein by
reference to exhibit 10(iii)(b) included in BGII's Registration
Statement No. 33-42227 on Form S-1 effective November 1, 1991).*
10.57 Amendment No. 2 to 1991 Incentive Plan of Bally Gaming International,
Inc. (incorporated herein by reference to exhibit 99(e) included in
BGII's Registration Statement No. 33-71154 on Form S-3 filed on
November 1, 1993).*
10.58 Amendment No 3 to 1991 Incentive Plan of Bally Gaming International,
Inc. (incorporated by reference to Annex III of S-4 registration
statement No. 333-01527).*
10.59 1991 Non-Employee Directors' Option Plan of Bally Gaming International,
Inc. (incorporated herein by reference to exhibit 10(iii)(f) included
in BGII's Annual Report on Form 10-K for the fiscal year ended December
31, 1991).*
10.60 Amendment No. 1 to the 1991 Non-Employee Directors' Option Plan of
Bally Gaming International, Inc. (incorporated herein by reference to
exhibit 10(iii)(g) included in BGII's Annual Report on Form 10-K for
the fiscal year ended December 31, 1991).*
10.61 Amendment No. 2 to the 1991 Non-Employee Directors' Option Plan of
Bally Gaming International, Inc. (incorporated by reference to S-4
registration statement No. 333-01527).*
</TABLE>
54
<PAGE> 55
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
10.62 Amendment No. 3 to the 1991 Non-Employee Directors' Option Plan of
Bally Gaming International, Inc. (incorporated by reference to Annex IV
of S-4 registration statement No. 333-01527).*
10.64 Bally Gaming International, Inc. 1994 Stock Option Plan for
Non-employee Directors, as amended (incorporated herein by reference to
exhibit 10(iii)(k) included in BGII's Annual Report on Form 10-K for
the period ended December 31, 1994.)
10.65 Employment Agreements, as amended, between Hans Kloss and each of Bally
Wulff Automaten GmbH and Bally Wulff Vertriebs GmbH (incorporated
herein by reference to exhibit 10(iii)(b) included in BGII's
Registration Statement No. 33-42227 on Form S-1, effective November 3,
1991).*
10.66 Third Amendments, dated June 2, 1993, to Employment Agreements between
Hans Kloss and each of Bally Wulff Automaten GmbH and Bally Wulff
Vertriebs GmbH (incorporated herein by reference to exhibit 99(c)
included in BGII's Registration Statement No. 33-71154 on Form S-3
filed on November 1, 1993).*
10.70 Separation Agreement, dated as of November 5, 1996 between the Company
and Steve Greathouse.*
10.71 Employment Agreement, dated as of March 31, 1995, between the Company
and David D. Johnson (incorporated by reference to the Company
quarterly report on Form 10-Q for March 31, 1997).*
10.72 Employment Agreement Supplement, dated as of August 29, 1996, between
the Company and Joel Kirschbaum (incorporated by reference to the
Company quarterly report on Form 10-Q for March 31, 1997).*
10.73 Employment Agreement Supplement, dated as of August 29, 1996, between
the Company and Anthony DiCesare (incorporated by reference to the
Company quarterly report on Form 10-Q for March 31, 1997).*
10.74 Employment Agreement, dated as of June 24, 1996, between the Company
and Scott D. Schweinfurth (incorporated by reference to the Company
quarterly report on Form 10-Q for March 31, 1997).*
10.75 Employment Agreement, dated as of June 17, 1997 between the Company and
Morris Goldstein .*
10.76 Employment Agreement, dated July 1, 1997 between the Company and Joel
Kirschbaum.*
10.77 Employment Agreement, dated July 1, 1997 between the Company and
Anthony DiCesare .*
10.78 Agreement, between the Company and Kirkland Investment Corporation
dated July 1, 1997 .
10.79 Amendment Number 1 to the agreement between the Company and Kirkland
Investment Corporation dated July 1, 1997 .
21 Subsidiaries of the Registrant.
</TABLE>
55
<PAGE> 56
ALLIANCE GAMING CORPORATION
FORM 10-K
YEAR ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
23.1 Consent of KPMG Peat Marwick LLP
27.1 Financial Data Schedule
</TABLE>
* Management contract or compensatory plan or arrangement.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(CONTINUED)
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K for the three months ended June
30, 1997.
(c) See Item 14(a)(3) above.
(d) See Item 14(a)(2) above.
56
<PAGE> 57
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ALLIANCE GAMING CORPORATION DATED: September 24, 1997
By /s/ MORRIS GOLDSTEIN
-------------------------------------
Morris Goldstein,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ MORRIS GOLDSTEIN President and Chief Executive Officer September 24, 1997
- -------------------- (Principal Executive Officer)
Morris Goldstein
/s/ SCOTT D. SCHWEINFURTH Sr. Vice President, Treasurer and Chief September 24, 1997
- ------------------------- Financial Officer (Principal Financial and
Scott D. Schweinfurth Accounting Officer)
/s/ JACQUES ANDRE Director September 24, 1997
- -------------------
Jacques Andre
/s/ ANTHONY DICESARE Director September 24, 1997
- --------------------
Anthony DiCesare
/s/ MICHAEL HIRSCHFELD Director September 24, 1997
- ----------------------
Michael Hirschfeld
/s/ JOEL KIRSCHBAUM Director September 24, 1997
- --------------------
Joel Kirschbaum
/s/ ALFRED H. WILMS Director September 24, 1997
- -------------------
Alfred H. Wilms
</TABLE>
<PAGE> 58
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Alliance Gaming Corporation:
We have audited the accompanying consolidated balance sheets of Alliance Gaming
Corporation and Subsidiaries as of June 30, 1996 and 1997 and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended June 30, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Alliance Gaming
Corporation and Subsidiaries as of June 30, 1996 and 1997, and the results of
their operations and their cash flows for each of the years in the three-year
period ended June 30, 1997, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Las Vegas, Nevada
September 3, 1997
F-1
<PAGE> 59
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In 000's except share amounts)
<TABLE>
<CAPTION>
ASSETS
June 30, June 30,
1996 1997
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 48,057 $ 28,924
Accounts and notes receivable, net of allowance for doubtful accounts
of $17,727 and $21,929 93,502 87,701
Inventories, net of reserves of $9,484 and $8,856 41,656 37,329
Other current assets 8,354 9,627
--------- ---------
Total current assets 191,569 163,581
--------- ---------
Long-term notes receivable, net of allowance for doubtful accounts
of $1,770 and $1,972 14,184 8,981
Leased equipment, net 3,507 7,902
Property, plant and equipment, net 74,577 74,647
Excess of costs over net assets of acquired businesses,
net of accumulated amortization of $422 and $1,723 60,292 62,098
Intangible assets, net of accumulated amortization of $5,216 and $9,626 20,247 18,231
Deferred tax assets, net of valuation allowance 5,459 11,776
Other assets, net of reserves of $3,679 and $3,502 5,669 4,800
--------- ---------
$ 375,504 $ 352,016
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 16,240 $ 14,270
Accrued compensation and related costs 7,309 6,974
Other accrued liabilities 31,234 30,418
Current maturities of long term debt 25,777 1,124
--------- ---------
Total current liabilities 80,560 52,786
--------- ---------
Senior Secured Notes, net of unamortized discount of $3,071 and $2,776 150,929 151,224
Other long term debt, less current maturities 14,638 21,491
Deferred tax liabilities 4,731 10,365
Other liabilities 2,100 2,068
--------- ---------
Total liabilities 252,958 237,934
--------- ---------
Minority interest 1,148 1,546
Series B Special Stock, $.10 par value, $100 liquidation value;
684,551 and 754,198 shares issued and outstanding, net of discount 51,552 58,981
Commitments and contingencies
Stockholders' equity:
Special Stock, 10,000,000 shares authorized:
Series E, $100 liquidation value; 113,160 shares and 123,689 shares
issued and outstanding 11,316 12,368
Common Stock, $.10 par value; 175,000,000 shares authorized,
31,763,000 and 31,852,000 shares issued and outstanding 3,176 3,185
Additional paid-in capital 139,031 138,590
Cumulative translation adjustment (287) (11,719)
Accumulated deficit (83,390) (88,869)
--------- ---------
Total stockholders' equity 69,846 53,555
--------- ---------
$ 375,504 $ 352,016
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE> 60
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In 000's, except per share amounts)
<TABLE>
<CAPTION>
Years Ended June 30,
-------------------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Gaming equipment and systems $ --- $ 10,575 $ 134,734
Wall machines and amusement games --- 3,356 131,934
Route operations 106,854 109,938 127,028
Casino operations 25,134 48,509 51,450
--------- --------- ---------
131,988 172,378 445,146
--------- --------- ---------
Costs and expenses:
Cost of gaming equipment and systems --- 7,213 84,496
Cost of wall machines and amusement games --- 2,022 68,426
Cost of route operations 79,887 84,212 95,716
Cost of casino operations 14,231 22,046 22,269
Selling, general and administrative 28,249 30,620 100,415
Provision for doubtful receivables 400 1,020 9,059
Depreciation and amortization 9,520 10,988 22,606
Direct acquisition costs 1,669 55,843 ---
Unusual items 2,293 5,498 700
--------- --------- ---------
136,249 219,462 403,687
--------- --------- ---------
Operating income (loss) (4,261) (47,084) 41,459
Other income (expense):
Interest income 2,798 1,571 1,620
Interest expense (8,133) (8,897) (23,626)
Rainbow royalty (810) (4,070) (4,722)
Minority interest (397) (963) (1,092)
Other, net 317 301 139
--------- --------- ---------
Income (loss) before income taxes (10,486) (59,142) 13,788
Income tax provision (265) (755) (7,993)
--------- --------- ---------
Net income (loss) (10,751) (59,897) 5,785
Special Stock dividends, including repurchase premium --- (362) (11,974)
--------- --------- ---------
Net loss applicable to common shares $ (10,751) $ (60,259) $ (6,189)
========= ========= =========
Net loss per common share $ (0.95) $ (4.64) $ (0.19)
========= ========= =========
Weighted average common shares outstanding 11,300 13,000 31,822
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 61
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In 000's)
<TABLE>
<CAPTION>
Initial Series
and Series E Total
Common Stock Special Stock Additional Unrealized Cumulative Stock-
-------------------- -------------------- Paid-in Accum. Loss on Translation holders'
Shares Dollars Shares Dollars Capital Deficit Securities Adjustment Equity
--------- --------- --------- --------- ---------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at June 30, 1994 10,506 $ 1,051 1,333 $ 133 $ 26,716 $ (12,380) $ (421) - $ 15,099
Net loss - - - - - (10,751) - - (10,751)
Shares issued for acquisition 712 71 - - 3,683 - - - 3,754
Compensatory stock issued 250 25 - - 1,288 - - - 1,313
Net change in unrealized loss on
securities available for sale - - - - - - 105 - 105
Shares issued upon exercise of
options 186 18 - - 447 - - - 465
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Balances at June 30, 1995 11,654 1,165 1,333 133 32,134 (23,131) (316) - 9,985
Net loss - - - - - (59,897) - - (59,897)
Shares issued for acquisition and
related financing 2,145 215 7,496 - - - 7,711
Initial Series Special Stock
converted into common stock 1,333 133 (1,333) (133) - - - - -
Conversion of subordinated
debentures 15,136 1,513 113 11,316 95,151 - - - 107,980
Common stock issued in
private placement 1,495 150 - - 4,250 - - - 4,400
Special Stock dividend - - - - - (362) - - (362)
Net change in unrealized loss on
securities available for sale - - - - - - 316 - 316
Foreign currency translation
adjustment - - - - - - - (287) (287)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Balances at June 30, 1996 31,763 3,176 113 11,316 139,031 (83,390) - (287) 69,846
Net income - - - - - 5,785 - - 5,785
Shares issued upon exercise of
options 92 9 - - 281 - - - 290
Adjustments to acquisition
consideration (3) - - - (12) - - - (12)
Special Stock dividends - - 10 1,052 - (11,264) - - (10,212)
Special Stock repurchase premium - - - - (710) - - - (710)
Foreign currency translation
adjustment - - - - - - - (11,432) (11,432)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Balances at June 30, 1997 31,852 $ 3,185 123 $ 12,368 $ 138,590 $ (88,869) $ - $ (11,719) $ 53,555
========= ========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 62
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In 000's)
<TABLE>
<CAPTION>
Years Ended June 30,
---------------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (10,751) $ (59,897) $ 5,785
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 9,520 10,988 22,606
Amortization of debt discounts 297 245 807
Loss on debenture conversion - 30,079 -
Writedown of other assets 2,796 6,095 1,075
Loss on sale of assets - 105 1,233
Provision for doubtful receivables 400 1,020 9,059
Other 1,282 1,544 (651)
Change in operating assets and liabilities, net
of effects of businesses acquired:
Accounts and notes receivable 1,345 (5,934) (4,601)
Inventories (40) 5,844 (6,898)
Other current assets 255 (95) (1,549)
Accounts payable (447) (1,889) (1,970)
Accrued liabilities (2,355) 12,780 (760)
--------- --------- ---------
Net cash provided by operating activities 2,302 885 24,136
--------- --------- ---------
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired 2,481 (79,209) -
Additions to property, plant and equipment (8,887) (8,101) (13,257)
Proceeds from disposal of property and equipment 351 2,282 254
Sales (purchases) of securities available for sale (11,086) 13,516 -
Additions to intangible assets (425) (1,097) (6,749)
Additions to other long-term assets (5,427) (3,994) (1,825)
--------- --------- ---------
Net cash used in investing activities (22,993) (76,603) (21,577)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from long-term debt, net of expenses - 145,420 -
Reduction of long-term debt (3,125) (51,446) (6,774)
Net change in credit lines - - (11,578)
Issuance of Series B Special Stock, net of discount - 15,000 -
Fees paid for conversion of convertible debentures - (3,333) -
Issuance of common stock 465 4,400 -
Repurchase of Series B Special Stock - - (3,879)
Proceeds from exercise of stock options - - 767
--------- --------- ---------
Net cash provided by (used in) financing activities (2,660) 110,041 (21,464)
--------- --------- ---------
Effect of exchange rate changes on cash - - (228)
--------- --------- ---------
Cash and cash equivalents:
Increase (decrease) for year (23,351) 34,323 (19,133)
Balance, beginning of year 37,085 13,734 48,057
--------- --------- ---------
Balance, end of year $ 13,734 $ 48,057 $ 28,924
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 63
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1995, 1996 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS
Description of business
Alliance Gaming Corporation ("Alliance" or the "Company") is a
diversified, worldwide gaming company that (i) designs and manufactures
gaming machines and computerized monitoring systems for gaming
machines, (ii) owns and manages a significant installed base of gaming
machines, (iii) owns and operates two regional casinos and (iv) in
Germany, is a full-service supplier of wall-mounted gaming machines and
amusement games
Principles of consolidation
The accompanying consolidated financial statements include the accounts
of Alliance Gaming Corporation, and its wholly-owned and partially
owned, controlled subsidiaries. In the case of Video Services, Inc.
("VSI"), the Company owns 100% of the voting stock. The Company is
entitled to receive 71% of dividends declared by VSI, if any, at such
time that dividends are declared. Effective March 29, 1995 the Company
acquired the general partnership interest in a dockside casino in
Vicksburg, Mississippi and accordingly the results of operations of the
Rainbow Casino have been included in the accompanying consolidated
financial statements since that date. Effective June 18, 1996, the
Company acquired Bally Gaming International, Inc. ("BGII"); the results
of operations of BGII have been included in the accompanying
consolidated financial statements since that date. All significant
intercompany accounts and transactions have been eliminated. Certain
reclassifications have been made to prior year financial statements to
conform with the current year presentation.
Cash and cash equivalents
Cash equivalents consist of highly liquid debt instruments purchased
with an original maturity of three months or less at the date of
purchase and are carried at cost, which approximates market value.
Inventories
Inventories are stated at the lower of cost, determined on a first-in,
first-out basis, or market. Cost elements included for work-in-process
and finished goods include raw materials, freight, direct labor and
manufacturing overhead.
Inventories consist of the following at June 30, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
(In 000's)
Raw materials $13,339 $ 9,356
Work-in-process 1,264 1,683
Finished goods 27,053 26,290
------- -------
Total $41,656 $37,329
======= =======
</TABLE>
Property, plant and equipment
Property, plant and equipment are stated at cost and depreciated over
the estimated useful lives or lease terms, if less, using the straight
line method as follows; buildings and improvements, 30-39 years; gaming
equipment, 5-7 years; furniture, fixtures and equipment, 3-10 years;
and leasehold improvements, 5-20 years.
F-6
<PAGE> 64
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Significant replacements and improvements are capitalized; other
maintenance and repairs are expensed. The cost and accumulated
depreciation of assets retired or otherwise disposed of are eliminated
from the accounts and any resulting gain or loss is credited or charged
to income as appropriate.
Property, plant and equipment consists of the following at June 30,
1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
(In 000's)
Land $ 20,336 $ 21,610
Buildings and leasehold improvements 29,819 30,027
Gaming equipment 36,895 46,247
Furniture, fixtures and equipment 15,614 16,458
Less accumulated depreciation and amortization (28,087) (39,695)
-------- --------
Property, plant and equipment, net $ 74,577 $ 74,647
======== ========
</TABLE>
Excess of costs over net assets of acquired businesses
Excess of costs over net assets of acquired businesses is the excess of
the cost over the fair value of net assets of acquired businesses and
is generally amortized on the straight-line method over a period of 40
years.
Intangible assets
Intangible assets consist primarily of costs associated with the
acquisition of location leases which are capitalized and amortized
using the straight-line method over the terms of the leases, ranging
from one to 24 years, with an average life of approximately 10 years,
and deferred issuance costs for financing which are amortized over the
life of the related financing. The Company continually evaluates
whether events and circumstances have occurred that indicate the
estimated useful life may warrant revision or that the remaining
balance may not be recovered.
Estimates
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Impairment recognition
Management evaluates the carrying value of all long-lived assets to
determine recoverability based on an analysis of non-discounted future
cash flows. Based on its most recent analysis, management believes that
no material impairment in the value of long-lived assets exists at June
30, 1997.
Revenue recognition
The Company sells equipment and systems on normal credit terms (90 days
or less), over longer term installments of up to 36 months or more or
through payments from the net winnings of the machines until the
purchase price is paid. Revenue from sales of gaming machines and
amusement games is normally recognized at the time products are shipped
and title has passed to the customer. Revenue from sales of software
included in computerized monitoring systems is recognized at the time
the system is accepted by the customer, which normally coincides with
installation of the equipment. Revenue from sales of hardware included
in computerized monitoring systems is recognized at the time the
product is shipped.
F-7
<PAGE> 65
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In accordance with industry practice, the Company recognizes gaming
revenues as the net win from gaming machine operations, which is the
difference between coins and currency deposited into the machines and
payments to customers and, for other games, the difference between
gaming wins and losses. The Company recognizes total net win from
gaming devices as revenues for route operations which operate under
revenue-sharing arrangements and revenue-sharing payments as a cost of
route operations. The Company monitors its exposure for credit losses
and maintains allowances for anticipated losses.
Unusual items
The Company discloses as a separate component of operating income
(loss), income and expense items that are unusual and infrequently
occurring. During the year ended June 30, 1997 the Company incurred
unusual charges of $0.7 million related primarily to separation costs
of Alliance personnel subsequent to the BGII acquisition.
During the year ended June 30, 1996 the Company incurred unusual
charges for the write off of its investments in projects in Kansas and
one Native American development project, totaling $3.4 million. Also in
fiscal year 1996 the Company incurred unusual charges in its route
operations for reserves for certain parts inventories which became
obsolete due to technological changes to gaming devices being deployed
as a result of the new Gambler's Bonus product, as well as an accrual
to reserve for the present value of the future lease payments for one
small casino location for which cash flows received under the
participation agreement were inadequate to service the building lease
paid by the Company, totaling $2.1 million.
During 1995 the Company incurred unusual items consisting of $1.3
million in compensation expense recognized upon the issuance of 250,000
shares of Common Stock to the Company's then President, Chief Executive
Officer and Chairman of the Board, in connection with his employment
agreement, and $1.0 million related to certain contracts and
termination costs.
Foreign currency translation
The functional currency of the Company's foreign subsidiaries is their
local currency. Assets and liabilities of foreign operations are
translated into U.S. dollars at the rate of exchange at the end of the
period, and the income and expense accounts are translated at the
average rate of exchange for the period. Translation adjustments are
reflected as a separate component of stockholders' equity. Gains and
losses on foreign currency transactions are included in the
accompanying consolidated statements of operations.
Income taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the period that includes the
enactment date. Taxes on income of the Company's foreign subsidiaries
are provided at the tax rates applicable to the tax jurisdictions in
which they are located.
Loss per share of common stock
Loss per share of common stock has been computed by dividing the net
loss applicable to common stockholders by the weighted average number
of shares of common stock outstanding. Fully diluted earnings per share
is not presented because the effect of the common stock equivalents
would be anti-dilutive.
F-8
<PAGE> 66
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Fair value of financial instruments
The fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing
parties, other than in a forced sale or liquidation. The carrying
amounts at June 30, 1997 for the Company's financial instruments
approximate fair value.
Recently Issued Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings per Share" (SFAS No. 128) which establishes standards for
computing and presenting earnings per share ("EPS"), and supersedes APB
Opinion No. 15. The Statement replaces primary EPS with basic EPS and
requires dual presentation of basic and diluted EPS. The Statement is
effective for both interim and annual periods ending after December 15,
1997 and earlier application is not permitted. After adoption, all
prior period EPS data must be restated to conform to SFAS No. 128.
For the years ended June 30, 1995, 1996 and 1997 the basic EPS does
not differ from the reported primary EPS, and diluted EPS would have
been antidilutive for each of these periods.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" which establishes requirements for disclosure of comprehensive
income and becomes effective for the Company for the year ending June
30, 1999. Comprehensive income includes items such as foreign currency
translation adjustments which are currently being presented by the
Company as a component of stockholders' equity. This is a disclosure
item only and will have no impact on reported earnings per share.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information" which establishes standards
for disclosure about operating segments in annual financial statements
and selected information in interim financial reports. SFAS No. 131
also establishes standards for related disclosures about products and
services, geographic areas and major customers and will supersede SFAS
No. 14, "Financial Reporting for Segments of a Business Enterprise."
The new standard becomes effective for years beginning after December
15, 1997. This is a disclosure item only and will have no impact on
reported earnings per share.
2. ACQUISITIONS
On June 18, 1996, the Company completed the acquisition of all the
outstanding shares of BGII. The consideration paid consisted of
approximately $77.2 million in cash, $3.0 million in the Company's
common stock and $36.6 million in the Company's Series B Special Stock
which totaled $11.84 per share for the 9,855,500 shares of BGII
outstanding (excluding the 1,000,000 shares beneficially owned by the
Company). The acquisition has been accounted for as a purchase and the
results of operations of BGII have been included in the consolidated
financial statements beginning on June 18, 1996. The purchase price was
allocated based on estimated fair values at the date of the
acquisition. At June 30, 1997, the excess of purchase price over the
fair value of the net assets acquired was approximately $61.2 million
which is being amortized on a straight-line basis over 40 years. During
fiscal 1997 the Company made certain adjustments aggregating
approximately $6.6 million to the goodwill originally recorded, related
to the settlement of certain pre-acquisition contingencies.
On a pro forma basis for the year ended June 30, 1996 assuming the
acquisition of BGII occurred on July 1, 1995, the Company would have
had revenues of $397.9 million and a net loss applicable to common
shares of $26.5 million (or an $0.83 loss per common share).
The Company incurred direct acquisition costs of $1.7 million and $55.8
million during the fiscal years ended June 30, 1995, and 1996,
respectively. The direct acquisition costs have been presented
separately in the Company's consolidated statements of operations, as
management believes that such presentation provides additional relevant
information. Direct acquisition costs in fiscal year 1996 included the
$30.1 million non-cash accounting loss on the exchange offer component
of the financing for the acquisition plus legal, accounting,
transaction financing fees, public and investor relations, printing
costs and related costs.
F-9
<PAGE> 67
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. RECEIVABLES
The Gaming Equipment and Systems and Wall Machines and Amusement Games
business units grant certain customers extended payment terms under
contracts of sale. These contracts are generally for terms of one to
three years, with interest at prevailing rates, and are generally
collateralized by the related equipment sold although the value of such
equipment, if repossessed, may be less than the receivable balance
outstanding. See "Concentration of Credit Risk". The Company's Nevada
route operations from time to time make loans to location operators for
build-outs, tenant improvements and initial operating expenses, which
are generally secured by the personal guarantees of the operators and
the locations' assets. The majority of the loans bear interest rates
between 8% to 14%. They are expected to be repaid over a period of time
not to exceed the life of the revenue sharing arrangement and have due
dates ranging from July 1997 to April 2007.
The following table represents, at June 30, 1997, scheduled collections
of accounts and notes receivable (net of allowances for doubtful
accounts) by fiscal year:
<TABLE>
<CAPTION>
Years ended June 30, (In 000's)
----------------------------------------------------------------------------------------------
1998 1999 2000 2001 2002 Thereafter Total
---- ---- ---- ---- ---- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
$ 87,701 $ 5,024 $ 2,001 $ 381 $ 562 $ 1,013 $ 96,682
==============================================================================================
</TABLE>
4. REFINANCING TRANSACTION
In August 1997 the Company effected a series of related transactions
(as described below, the "Refinancing"). The Refinancing consisted of
the private placement of $150 million of Senior Subordinated Notes and
the closing of $230 million of bank financing. The bank financing
provides for (i) term loans in the aggregate amount of up to $140.0
million, comprised of a $75.0 million tranche with a 7 1/2-year term
(the "Tranche B Term Loan"), a $40.0 million tranche with an 8-year
term (the "Tranche C Term Loan", and together with the Tranche B Term
Loan, the "Term Loan Facilities") and a $25.0 million tranche with a 7
1/2-year term (the "Delayed Draw Term Facility"); and (ii) a $90.0
million revolving credit facility (the "Revolving Credit Facility")
with a 6 year term. Each of these credit facilities are variable rate
borrowings in accordance with a credit grid. The interest rates at the
highest level of the credit grid and maturity dates are as follows:
<TABLE>
<CAPTION>
Initial Maturity
Rate Date
------------ ----------------
<S> <C> <C>
Tranche B Term Loan LIBOR + 2.75% January 31, 2005
Tranche C Term Loan LIBOR + 3.00% July 31, 2005
Delayed Draw Term Facility LIBOR + 2.75% January 31, 2005
Revolving Credit Facility LIBOR + 2.25% July 31, 2003
</TABLE>
As part of the Refinancing, the Company used the proceeds of the
Subordinated Note offering, together with borrowings under the
Revolving Credit Facility, the Term Loan Facilities and the Delayed
Draw Term Facility and cash on hand to fund (a) the repurchase at a
premium of substantially all of the Company's 12 7/8% Notes, plus
accrued interest to August 8, 1997 totaling $183.7 million, (b) the
redemption at liquidation value of all of the Company's Series B
Preferred Stock on September 8, 1997 totaling $77.6 million, (c) the
purchase from HFS Gaming Corporation of the right to receive royalty
payments based on revenues of the Rainbow Casino and the repayment of
related debt owed to an HFS affiliate, National Gaming Mississippi,
Inc. on August 12, 1997 totaling $26.3 million and (d) the payment of
transaction fees and expenses totaling $16.6 million. At June 30, 1997,
based on the terms of the new $90.0 million Revolving Credit Facility,
the Company would have been able to borrow the full amount of the
revolving credit line, of which the Company had initial borrowings of
approximately $14.5 million on August 8, 1997. The borrowing base for
the revolving credit facility includes eligible receivables and
inventory (as defined). Additionally, in July
F-10
<PAGE> 68
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1997 the Company redeemed the remaining balance of the 7 1/2
Convertible Debentures at a price of 104, or a total of $1.7 million.
In conjunction with the Refinancing, the Company incurred fees,
expenses, and charges totaling approximately $78.4 million, including
the premium on the repurchase of the 12 7/8% notes of $27.7 million and
$16.4 million for the difference between the carrying value and the
liquidation value of the Series B Preferred Stock, which will be
recorded in the quarter ended September 30, 1997. On a pro forma basis
as of June 30, 1997, in comparison to the actual year end balances, the
Refinancing would have resulted in a decrease in cash and cash
equivalents of $12.8 million, a decrease in working capital of $13.5
million, an increase in total long-term debt of $128.0 million, but the
elimination of the 12 7/8% Notes and Series B Preferred Stock.
The Senior Subordinated Notes bear interest at 10%, are due in 2007,
and are general unsecured obligations of the Company, ranking
subordinate in right of payment to all Senior Debt (as defined) of the
Company, including indebtedness under the new credit facility. The
Senior Subordinated Notes will be fully and unconditionally guaranteed
on a joint and several senior subordinated basis by all existing and
future domestic Restricted Subsidiaries (as defined) of the Company,
subject to certain exceptions including the partially-owned entities
through which its Mississippi casino and Louisiana route operations are
conducted. The Subsidiary Guarantees (as defined) are general unsecured
obligations of the Guarantors, ranking subordinate in right of payment
to all Senior Debt of the Guarantors. The Company will be able to
designate other current or future subsidiaries as Unrestricted
Subsidiaries (as defined) under certain circumstances. Unrestricted
Subsidiaries will not be required to issue a Subsidiary Guarantee and
will not be subject to many of the restrictive covenants set forth in
the Indenture pursuant to which the Senior Subordinated Notes were
issued. The Indenture for the Company's Senior Subordinated Notes
contains various covenants, including limitations on incurrence of
additional indebtedness, on restricted payments and on dividend and
payment restrictions on subsidiaries. The Senior Subordinated Notes may
not be redeemed for the first five years. Upon the occurrence of a
Change of Control (as defined), the holders of the Senior Subordinated
Notes will have the right to require the Company to purchase their
Notes at a price equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase.
The new credit facility is guaranteed by each domestic subsidiary of
the U.S. Borrower and German Subsidiaries (both as defined), other than
the entity which holds the Company's interest in its Louisiana
operations and other non-material subsidiaries (as defined), and is
subject to both a U.S. and German Pledge Agreement (both as defined).
The new credit facility contains a number of maintenance covenants and
together with the indenture, both have other significant covenants
that, among other things, restrict the ability of the Company and
certain of its subsidiaries to dispose of assets, incur additional
indebtedness and issue preferred stock, pay dividends or make other
distributions, enter into certain acquisitions, repurchase equity
interests (as defined) or subordinated indebtedness, issue or sell
equity interests of the Company's subsidiaries (as defined), engage in
mergers or consolidations, or engage in certain transactions with
subsidiaries and affiliates and otherwise restrict corporate
activities. After considering the Refinancing transaction described
above, the resulting maturities of long-term debt, for each of the five
fiscal years ending subsequent to June 30, 1997 are as follows:
<TABLE>
<CAPTION>
Years ended June 30, (In 000's)
--------------------------------------------------------------------------------------
1998 1999 2000 2001 2002 Thereafter Total
---- ---- ---- ---- ---- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
$1,989 $2,468 $1,974 $1,974 $2,017 $297,944 $308,366
======================================================================================
</TABLE>
F-11
<PAGE> 69
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. DEBT AND LINES OF CREDIT
As discussed in Note 4, substantially all of the Company's indebtedness
shown below was repaid as part of the Refinancing. Prior to the
Refinancing, long-term debt and lines of credit at June 30, 1996 and
1997 consisted of the following:
<TABLE>
<CAPTION>
1996 1997
-------- --------
(In 000's)
<S> <C> <C>
12 7/8% Senior Secured Notes due 2003, net of
unamortized discount of $3,071,000 and $2,776,000 $150,929 $151,224
7 1/2% Convertible subordinated debentures due 2003, unsecured 1,642 1,642
Hospitality Franchise Systems note payable,
secured by the assets of the Rainbow Casino 7,864 6,569
Subordinated note payable to stockholder 2,268 -
Bally Wulff revolving lines of credit 13,664 9,611
Bally Gaming and Systems revolving line of credit 7,525 -
Other, secured by related equipment 7,452 4,793
-------- --------
191,344 173,839
Less current maturities 25,777 1,124
-------- --------
Long-term debt, less current maturities $165,567 $172,715
======== ========
</TABLE>
In connection with the acquisition of BGII, the Company issued $154.0
million aggregate principal amount of 12 7/8% Senior Secured Notes due
2003 (the "12 7/8% Notes") and 15% Non Voting Senior Pay-in-Kind
Special Stock Series B (the "Series B Preferred Stock") with an
original liquidation value of $68.5 million. The 12 7/8% Notes were
secured by pledges of equity interests in certain of the Company's
subsidiaries, and were fully and unconditionally guaranteed on a joint
and several senior basis by each present and future subsidiary, as
defined.
During 1995, Hospitality Franchise Systems, Inc. ("HFS") and its
affiliate, National Gaming Mississippi, Inc. ("NGM"), together agreed
to loan up to $12.0 million to the Company's majority controlled
subsidiary Rainbow Casino Vicksburg Partnership, L.P. ("RCVP"). Of
these loan commitments, RCVP ultimately borrowed $10.0 million and $1.3
million from HFS and NGM respectively. The notes bear interest at 7.5%
and 10%, respectively, and required monthly payments of principal and
interest over an 84-month period. Prior to the Refinancing, HFS was
entitled to receive a monthly royalty fee based on the Rainbow Casino's
gaming revenues of 12% on the first $40.0 million, 11% on the next
$10.0 million, and 10% thereafter.
The Bally Wulff entities held two bank lines of credit which provided
for borrowings of DM16,000,000 and DM750,000 (approximately $9.2
million and $0.4 million, respectively at June 30, 1997). The DM750,000
line of credit amortizes by DM250,000 per quarter and bears interest at
6.95%. The DM16,000,000 credit line bears interest at a rate tied to an
international borrowing rate plus 1% (4.30% at June 30, 1997) and is
due on demand. These lines were fully drawn at June 30, 1997. The Bally
Wulff entities also had a DM16,300,000 (approximately $9.4 million at
June 30, 1997) revolving line of credit for general working capital
purposes which bears interest at a rate tied to an international
borrowing rate plus 1% (4.30% at June 30, 1997) and was due on demand.
No amounts were outstanding under this line at June 30, 1997.
In March 1997, BGII's domestic subsidiary, Bally Gaming, Inc., obtained
a bank revolving line of credit which, as amended, provided for
borrowings tied to a percentage of Bally Gaming, Inc.'s eligible (as
defined in the credit agreement) inventory and accounts receivable with
a maximum borrowing capacity of $30.0 million. Borrowings under this
agreement bore interest at one and one-half percent above the bank's
prime rate (9.75% at June 30, 1997). Eligible borrowing capacity under
this agreement at June 30, 1997 was $30.0 million and no amounts were
outstanding at June 30, 1997.
In March 1992, Alfred H. Wilms, a director and the Company's largest
stockholder, provided to VSI, a majority-controlled subsidiary of
Alliance, a subordinated loan for $6.5 million (the "VSI Loan"). During
1993 the loan was funded and interest was charged based on the London
Interbank Offered Rate plus 2%.
F-12
<PAGE> 70
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
All scheduled principal and interest payments were made until September
1996 when the loan was paid in full.
In July 1997, the Company redeemed the remaining 7 1/2% Convertible
Debentures at a price of 104, or a total of $1.7 million.
6. STOCKHOLDERS' EQUITY, OPTIONS AND WARRANTS
Special Stock
The Company's Articles of Incorporation authorize the issuance of up to
10,000,000 shares of special stock ("Special Stock"). To date, there
have been three series of Special Stock issued: the Initial Series, the
Series B and the Series E. Special Stock consists of non-voting stock
where no holder of the Special Stock shall be entitled to vote at any
meeting of stockholders or otherwise, except as may be specifically
provided by law or as approved by the Board of Directors in certain
limited circumstances at the time of the stock issuance. The Special
Stock may be issued from time to time in one or more series, each
series having such designations, preferences and relative,
participating, optional or other special rights, qualifications,
limitations or restrictions as shall be stated and expressed in the
resolution providing for the issuance of Special Stock or any series
thereof adopted by the Board of Directors.
The Board had designated an initial series of Special Stock as
"Non-voting Junior Convertible Special Stock" which consisted of
1,333,333 shares (the "Initial Series") which were sold to Kirkland -
Ft. Worth Investment Partners, L.P. ("Kirkland"), pursuant to a Letter
Agreement dated June 25, 1993, for $5.0 million. The Initial Series had
certain conditions relating to regulatory licensing, which, when met
allowed the holder to convert on a one-for-one basis into shares of
common stock. The licensing condition was met and during fiscal year
1996 Kirkland elected to convert its shares to common stock.
In June 1996, the Company completed an offering of 200,000 shares of
its 15% Non-Voting Senior Pay-in-Kind Special Stock, Series B (the
"Series B Special Stock"). The Series B Special Stock was also issued
as part of the consideration in the BGII acquisition. During fiscal
year 1997 the Company recorded non-cash dividends in the form of
additional shares of Series B Special Stock totaling $10.2 million.
During fiscal year 1997 the Company repurchased a total of 18,000
shares of Series B Special Stock at a premium to their carrying value
of $0.7 million. As discussed in Note 4, on September 8, 1997 the
Company redeemed all of the outstanding shares of Series B Special
Stock at their liquidation price of $100 per share, plus accrued
dividends.
Each share of Series E Special Stock accrues cumulative dividends until
June 18, 1999 at an annual rate of 111/2%, payable quarterly in cash
or, at the Company's option, in additional shares of Series E Special
Stock. The Series E Special Stock is convertible after June 18, 1998
into common stock at a conversion price of $5.88 per share (equivalent
to a conversion rate of approximately 17.004 shares of common stock per
share of Series E Special Stock), subject to adjustment under certain
circumstances, and has a $100 liquidation preference per share. Upon
default in the payment of dividends for six consecutive dividend
payment dates, the number of directors constituting the Board of
Directors of the Company will be increased by two, and the holders of
shares of Series E Special Stock will have the right, voting separately
as a class with the holders of any parity stock, to elect two directors
to the Company's Board of Directors. Such right will exist until all
dividends accumulated on such shares have been paid or set apart for
payment in full. Other than as described above, the holders of shares
of Series E Special Stock have no other voting rights except as
required by law.
Stock Option Plans
In 1984, the Company created an Employee Stock Option Plan (the "1984
Plan") that provides for the issuance of up to 2,000,000 shares of
common stock to Company employees and directors. Generally, options are
granted at the fair market value of the Company's Common Stock at the
date of the grant and are exercisable over ten years.
F-13
<PAGE> 71
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In 1992, the Company created the 1991 Long Term Incentive Plan (the
"Incentive Plan") that, as amended, provides for the issuance of up to
3,000,000 shares of common stock to Company employees and directors.
Generally, options are granted at the fair market value of the
Company's Common Stock at the date of the grant and are exercisable
over five to ten years.
In April 1997 the Company's shareholders approved the 1996 Long-Term
Incentive Plan (the "1996 Plan") which provides for the issuance of up
to 3,000,000 shares of common stock to Company employees, directors and
designated paid consultants. Generally, options are granted at the fair
value of the Company's common stock at the date of grant and are
exercisable over five to ten years.
Pursuant to the BGII acquisition agreement, the Company assumed BGII's
obligations with respect to each of its outstanding stock options, and
such options became exercisable pursuant to employee election (except
for certain identified former executive officers and directors of BGII)
for a number of shares of Common Stock equal to the number of shares of
BGII common stock subject thereto. Such options must be exercised by
June 18, 1999.
On August 29, 1996, the Board of Directors repriced the exercise price
of previously issued, unexercised options for substantially all current
employees and directors to $3.4375 per share which was the closing
price of the Company's common stock on June 18, 1996. The closing price
of the Company's common stock on August 29, 1996 was $2.50.
Transactions involving stock options are summarized as follows:
Options Outstanding
<TABLE>
<CAPTION>
Shares Weighted-Average
------ Exercise Price
----------------
<S> <C> <C>
Balance, June 30, 1994 1,490,500 $5.60
----------------------
Granted 1,598,334 6.15
Exercised (186,000) 2.38
Canceled (285,000) 6.90
--------- ----
Balance, June 30, 1995 2,617,834 6.00
----------------------
Granted 689,000 3.39
Exercised --------- ----
Canceled (621,000) 5.97
--------- ----
Balance, June 30, 1996 2,685,834 5.53
----------------------
Granted 3,726,319 3.50
Exercised (91,836) 1.65
Canceled (1,704,000) 5.97
----------- ----
Balance, June 30, 1997 4,616,317 $3.84
---------------------- ========= =====
Exercisable at June 30, 1997 3,633,972 $4.02
========= =====
</TABLE>
The following options were outstanding as of June 30, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Weighted-Avg. Weighted-Avg.
Range of Remaining Outstanding Remaining Outstanding
Exercise Prices Contractual Life Shares Contractual Life Shares
--------------- ---------------- ----------- ---------------- -----------
<S> <C> <C> <C> <C>
$2.25 - $3.00 3.47 92,500 3.47 92,500
$3.01 - $4.00 6.12 4,085,483 5.87 3,129,250
$4.01 - $5.00 4.60 30,000 4.60 30,000
over $5.01 1.32 408,334 1.32 382,222
--------- ---------
4,616,317 3,633,972
========= =========
</TABLE>
At June 30, 1997, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $2.25 - $8.375
and 5.64 years, respectively.
F-14
<PAGE> 72
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company accounts for its stock-based employee compensation awards
in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"). Under APB 25,
because the exercise price of the Company's employee stock options
equals or exceeds the market price on date of grant, no compensation
expense is recognized. Had the Company determined compensation cost
based on the fair value at the grant date for its stock options under
SFAS No. 123, "Accounting for Stock Based Compensation," the Company's
net loss applicable to common shares would have increased from $60.3
million (or $(4.64) per share) to $61.2 million (or $(4.71) per share)
on a pro forma basis for the year ended June 30, 1996, and from a loss
of $6.2 million (or $(.19) per share) to $8.3 million (or $(.26) per
share) on a pro forma basis for the year ended June 30, 1997. Pro forma
net loss reflects only options granted in 1996 and 1997. Therefore, the
full impact of calculating compensation cost for stock options under
SFAS No. 123 is not reflected in the pro forma net income amounts
presented above because compensation cost is reflected over the
options' vesting period, generally three years, and compensation cost
for options granted prior to July 1, 1995 is not considered.
The per share weighted-average fair value of stock options granted
during 1996 and 1997 was $5.80 and $1.43, respectively, on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions for 1996 and 1997: expected dividend yield
of 0%, risk free interest rate of 6.5%, a volatility factor of .79 for
1996 and .51 for 1997, and expected lives varying from 3 to 10 years.
Warrants
At June 30, 1997, Mr. Wilms held warrants to purchase 2,000,000 shares
of Common Stock at $2.50 per share, subject to adjustment that expire
September 1, 1998. These warrants were issued in connection with the
funding of the $6.5 million five year subordinated loan for VSI.
Upon closing of the private placement of the Company's 7 1/2%
Convertible Subordinated Debentures and the $5.0 million equity
investment in the Initial Series by Kirkland-Ft. Worth Investment
Partners, L.P. ("Kirkland") on September 21, 1993, the Company issued
warrants to purchase up to 2,750,000 shares of Common Stock at $1.50
per share to Kirkland which expire September 21, 1999, but under
certain circumstances the expiration date may be extended. These
warrants are exercisable one year after the grant date and in equal
increments only after the market price of the Common Stock reaches $11,
$13 and $15. Under the same terms, the Company issued warrants to
purchase 1,250,000 and 30,000 shares of Common Stock to Gaming Systems
Advisors, L.P. ("GSA") and L.H. Friend, Weinress & Frankson, Inc.
("Friend"), respectively. The Company also issued warrants to purchase
500,000 and 250,000 shares of Common Stock at $8.25 per share to the
initial purchasers of the 7 1/2% Convertible Debentures; Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ") and Oppenheimer & Co.,
Inc. ("Oppenheimer"), respectively, each of which expire on September
21, 1999. During the year ended June 30, 1996, in connection with the
commencement of employment with the Company, the then Board Chairman
and then Vice-Chairman each were each granted warrants to purchase
250,000 shares of common stock on the same terms as the Kirkland
warrants described above except that such warrants expire on September
21, 2000. At the completion of the BGII acquisition, GSA was issued an
additional 2,500,000 warrants on the same terms as the original
warrants issued to Kirkland described above. During the financing stage
of the BGII acquisition, Cerberus Partners L.P. and certain affiliates
of Canyon Partners, Inc. were issued warrants to purchase 250,000
shares of Common Stock at $5.00 per share which expire on August 31,
2002. None of the warrants granted to Kirkland, GSA, Friend, and the
now former Board members were exercisable at June 30, 1997.
BGII had issued warrants to purchase 1,200,000 shares of common stock
at a purchase price of $12.50 per share expiring on July 29, 1998 all
of which are currently exercisable. Pursuant to the merger agreement,
the Company has assumed BGII's obligation with respect to each
outstanding warrant, and such warrants will be exercisable for the
merger consideration per share of BGII common stock subject to such
warrants.
F-15
<PAGE> 73
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At June 30, 1997, shares of the Company's Common Stock were reserved
for future issuance as follows:
<TABLE>
<CAPTION>
(In 000's)
<S> <C>
Shares underlying stock options issued or
issuable under the 1984 Plan 102
Shares underlying stock options issued or
issuable under the 1991 Plan 2,970
Shares underlying stock options issued or
issuable under the 1996 Plan 3,000
Shares underlying all warrants issued 10,125
Shares for former BGII option holders 431
------
Total 16,628
======
</TABLE>
7. INCOME TAXES
The components of the Company's income tax expense for the years ended
June 30, 1995, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
(In 000s)
Current tax expense:
U. S. Federal $ - $ 533 $ 225
Foreign - 172 7,701
State 102 50 750
------- ------- -------
102 755 8,676
------- ------- -------
Deferred tax expense
U. S. Federal 163 - -
Foreign - - (683)
State - - -
------- ------- -------
Total provision for income taxes $ 265 $ 755 $ 7,993
======= ======= =======
</TABLE>
A reconciliation of the Company's income tax provision as compared to
the tax provision calculated by applying the statutory federal tax rate
(35%) to the income (loss) before income taxes for the years ended June
30, 1995, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
(In 000's)
Computed expected income tax expense (benefit) at 35% $ (3,670) $(20,700) $ 4,826
Change in valuation allowance 3,736 (6,453) 169
Change in estimates, principally due to changes
in estimated tax depreciation and NOL's 1,166 686
State income taxes, net of federal benefit 67 33 488
Tax gain on conversion of debt to equity, net 18,265
Acquisition costs not currently deductible 7,102
Foreign taxes, net of federal benefit - - 1,940
Other, net 132 1,342 (116)
-------- -------- --------
$ 265 $ 755 $ 7,993
======== ======== ========
</TABLE>
F-16
<PAGE> 74
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The major components of the deferred tax assets and liabilities as of
June 30, 1996 and 1997 are presented below.
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
(In 000's)
Deferred Tax Assets:
Net operating loss carry forwards $ 8,923 $ 7,510
Foreign tax credit carry forwards 11,843 11,843
Inventory obsolescence reserves 3,721 4,048
Bad debt reserves 4,719 6,359
Accruals not currently deductible for tax purposes 2,831 3,581
Reserve for abandoned projects 1,863 1,311
Other 2,087 7,800
-------- --------
Total gross deferred tax assets 35,987 42,452
Less: Valuation allowance (30,528) (30,676)
-------- --------
Deferred tax assets $ 5,459 $ 11,776
======== ========
Deferred Tax Liabilities:
Property and equipment, principally due to
depreciation differences 3,172 3,703
Other 1,559 6,662
-------- --------
Total gross deferred tax liabilities 4,731 10,365
-------- --------
Net deferred tax assets $ 728 $ 1,411
======== ========
</TABLE>
Management has considered certain tax planning strategies as permitted
by Statement of Financial Accounting Standards No. 109 "Accounting for
Income Taxes". Management has determined that tax benefits associated
with recorded deferred tax assets, net of valuation allowance, are more
likely than not realizable through future taxable income and future
reversals of existing taxable temporary differences.
At June 30, 1997, the Company had net operating loss carry forwards for
federal income tax purposes of approximately $21.5 million which are
available to offset future federal taxable income, if any, expiring in
the years 2007 through 2011 and is subject to annual limitations with
respect to net operating losses pursuant to Section 382 of the Internal
Revenue Code of approximately $4.7 million. At June 30, 1997 the
Company has foreign tax credit carry forwards of approximately $11.8
million and alternative minimum tax credit (AMT) carry forwards of
approximately $1.5 million. Foreign tax credits are available to offset
future taxes due in the U.S. on future foreign taxable income and
expire between 1998 and 2002 unless utilized prior to such time. AMT
credits are available to be carried forward indefinitely and may be
utilized against regular U.S. Corporate tax to the extent it does not
exceed computed AMT calculations.
F-17
<PAGE> 75
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. SUPPLEMENTAL CASH FLOW INFORMATION
The following supplemental information is related to the consolidated
statements of cash flows. The Company recorded the following
significant non-cash items for the years ended June 30, 1995, 1996 and
1997:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------ ------
<S> <C> <C> <C>
(In 000s)
Acquisition of the general partnership interest in RCVP:
Property, plant and equipment $23,400 $ $
Long-term debt 13,839
Convertible debentures converted to equity securities 83,358
Common and Series B Special Stock issued in the BGII Acquisition 42,738
BGII common stock purchased in fiscal year
1995 and canceled upon consummation of the BGII Acquisition 10,481
Accrual of contingent payment to RCC 1,000
Dividends for Series E and Series B Special Stock 11,264
Translation rate adjustment 11,204
Valuation adjustments to pre-acquisition contingencies 962
Reclassify inventory to property, plant and equipment 9,642
Reclassify receivables to other assets 1,837
Reclassify other assets to property, plant and equipment 1,074 1,818
</TABLE>
Payments for interest expense in fiscal years 1995, 1996 and 1997 were
approximately $5.6 million, $8.0 million and $22.5 million
respectively. Payments for income taxes in fiscal years 1995, 1996 and
1997 were approximately $0.1 million, $0.3 million and $3.5 million
respectively.
9. COMMITMENTS AND CONTINGENCIES
Liabilities for loss contingencies arising from claims, assessments,
litigation, fines and penalties, or other sources are recorded when it
is probable that a liability has been incurred and the amount of the
liability can be reasonably estimated.
The Company is obligated under several patent agreements to pay
royalties ranging from approximately $50 to $200 per game depending on
the components in the gaming machines. Additionally, based on an
amendment to the trademark licensing agreement between BGII and Bally
Entertainment Corporation dated May 10, 1996, the Company is obligated
to pay a royalty on new machines sold or leased after June 18, 1996 of
$35 per machine with a minimum annual royalty payment of $1.0 million
for the initial five-year term of the amended agreement, which is
subject to annual renewals thereafter at the option of the Company.
Royalty expense under this agreement for the year ended June 30, 1997
was $1.0 million.
F-18
<PAGE> 76
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company leases office space, equipment, warehouse and repair
facilities, Route Operation locations, casino and other locations under
non-cancelable operating leases. Certain Route Operation location
leases provide only for contingent rentals based upon a percentage of
gaming revenue and are cancelable at any time by either party. Future
minimum rentals under non-cancelable operating leases at June 30, 1997
are:
<TABLE>
<CAPTION>
Year Total Net
Ended Minimum Sublease Minimum
June 30, Rentals Income Rentals
------- -------- -------- --------
(In 000's)
<S> <C> <C> <C>
1998 $12,658 $1,354 $11,304
1999 10,287 1,263 9,024
2000 7,958 829 7,129
2001 6,344 478 5,866
2002 4,574 446 4,128
Thereafter 42,805 1,755 41,050
-------- ------- --------
$ 84,626 $ 6,125 $ 78,501
======== ======= ========
</TABLE>
Operating lease rental expense, including contingent lease rentals, for
years ended June 30 1995, 1996 and 1997 was as follows:
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
(In 000's)
<S> <C> <C> <C>
Minimum rentals $ 9,704 $ 10,194 $ 15,126
Contingent rentals 58,113 60,525 70,744
-------- -------- --------
67,817 70,719 85,870
Sublease rental income (1,192) (1,487) (1,606)
-------- -------- --------
$ 66,625 $ 69,232 $ 84,264
======== ======== ========
</TABLE>
In conjunction with sales by Bally Gaming, Inc., with recourse to the
Company, of certain trade receivables to third parties, the Company has
guaranteed amounts due from three customers of approximately $10.5
million at June 30, 1997. It is possible that one or more of Bally
Gaming, Inc.'s customers whose obligation has been guaranteed may be
unable to make payments as such become due. In such an event, Bally
Gaming, Inc. may become responsible for repayment of at least a portion
of such amounts over the term of the receivables. At June 30, 1997,
amounts due from one customer under three contracts totaling $3.6
million were past due and these amounts and subsequent installments
have not been paid. In general, under the terms of these contracts, the
Company may be responsible for monthly payments of the outstanding
obligations. In August 1996, the Company received demand notices from
the holder of notes related to one customer's trade receivables for
which payments were in arrears from December 1995 and in December 1996,
the holder of the notes filed suit against the Company to seek payment
from the Company for approximately $3.6 million. The outcome of this
issue is not anticipated to have a material effect on the financial
position, results of operations or cash flows of the Company. A
provision for doubtful accounts of approximately $8.3 million on all
receivables with recourse is included in the Company's allowance for
doubtful accounts at June 30, 1997.
Through a wholly-owned subsidiary, the Company originally purchased a
45% limited partnership interest in Rainbow Casino Vicksburg
Partnership, L.P. ("RCVP"), a Mississippi limited partnership which
owns the casino, all assets (including the gaming equipment) associated
with the casino and certain adjacent parcels of land. In March 1995,
Alliance increased its ownership position from 45% to 100%. Pursuant to
the transactions consummated in March 1995, Rainbow Casino Corporation
(RCC), the former owner of 55% of the Rainbow Casino, is now entitled
to receive 10% of the net available cash flow after debt service and
other items, as defined (which amount increases to 20% of such amount
when revenues exceed $35.0 million but
F-19
<PAGE> 77
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
only on such incremental amount), for a period of 15 years, such period
being subject to one year extensions for each year in which a minimum
payment of $50,000 is not made. In addition, the agreement required
that, if under defined circumstances the casino achieved earnings of at
least $10.5 million before deducting depreciation, amortization,
royalty and income taxes, then the Company would be obligated to make a
one time payment to certain principals of the original partnership of
$1.0 million which payment was earned in fiscal 1996 and paid in cash
in September 1996.
During fiscal 1996, Bally Wulff increased the amount of tax reserves by
$1.0 million (to a total reserve of $1.4 million) as a result of
developments in an ongoing quadrennial audit of Wulff's tax returns for
the years 1988 through 1991. The German tax authorities have proposed
preliminary adjustments which range from $1.4 million (which has been
accrued) to $5.0 million.
LITIGATION
In the action filed on December 2, 1996, the Company was named as a
defendant in an action brought by Canpartners Investments IV and
Cerberus Partners, pending in federal district court for the Southern
District of New York. The Company entered into certain loan commitment
letters with the plaintiffs in August 1995, contemplating that the
plaintiffs would lend approximately $30.0 million to partially fund the
Company's then pending hostile tender offer for BGII. The Company
entered into a merger agreement with BGII in October 1995 and did not
use funds provided by the plaintiffs to fund the acquisition of BGII in
June 1996. The plaintiffs have asserted claims based upon the loan
commitment letters and failure to pay termination fees in connection
with such loan commitment, and seek damages on various theories,
ranging from $2.2 million (breach of contract and fraudulent
concealment) to in excess of $12.0 million (breach of duty of good
faith and fair dealing). The Company believes that it has strong
defenses and has filed a motion to dismiss the complaint. The Company
intends to defend the action vigorously.
On September 25, 1995, BGII was named as a defendant in a class action
lawsuit filed in Federal District Court in Nevada, by Larry Schreirer
on behalf of himself and all others similarly situated. The plaintiffs
filed suit against BGII and approximately 45 other defendants. Each
defendant is involved in the gaming business as either a gaming machine
manufacturer, distributor, or casino operator. The class action lawsuit
arises out of alleged fraudulent marketing and operation of casino
video poker machines and electronic slot machines. The plaintiffs
allege that the defendants' actions constitute violations of the
Racketeer Influenced and Corrupt Organizations Act (RICO) and give rise
to claims of common law fraud and unjust enrichment. The plaintiffs are
seeking monetary damages in excess of $1.0 billion, and are asking that
any damage awards be trebled under applicable Federal law. Management
believes the plaintiffs' lawsuit to be without merit. The Company
intends to vigorously pursue all legal defenses available to it.
In August 1996, the Company received demand notices from a holder of
customer notes receivable which were sold on a recourse basis to a
third party for which payments were in arrears from December 1995. In
December 1996 the holder of the notes filed suit against the Company
seeking payment from the Company of approximately $3.6 million. The
Company intends to vigorously pursue all legal defenses available to
it.
The Company is also a party to various lawsuits relating to routine
matters incidental to its business. Management does not believe that
the outcome of such litigation, including the matters above, in the
aggregate, will have a material adverse effect on the Company.
10. CONCENTRATION OF CREDIT RISK
The financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of accounts and notes
receivable and customer obligations guaranteed by the Company. Each of
the Company's business units conducts business in and the resulting
receivables are concentrated in specific legalized gaming regions. The
Company also distributes its products through third party
distributors resulting in distributor receivables. At June 30, 1997 net
accounts and notes receivable, including obligations of three
F-20
<PAGE> 78
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
customers which are guaranteed by the Company, by region as a
percentage of total net receivables are as follows:
<TABLE>
<CAPTION>
Wall Machines Gaming
and Amusement Equipment Route Casino
Games and Systems Operations Operations Total
------------- ----------- ---------- ---------- -----
<S> <C> <C> <C> <C> <C>
Germany 46.7% % % % 46.7%
Other International jurisdictions 1.4 19.7 21.1
Nevada 12.4 4.2 16.6
Mississippi 3.7 3.7
Atlantic City 2.6 2.6
Others individually less than 5% 9.3 9.3
---- ---- ---- ---- -----
48.1% 47.7% 4.2% % 100.0%
==== ==== ==== ==== =====
</TABLE>
Receivables and customer obligations guaranteed by the Company from
emerging market customers contain increased risk factors compared to
receivables at the Bally Wulff entities or other traditional markets
for Bally Gaming, Inc.
11. SEGMENT INFORMATION
The Company has operations based primarily in Germany and the United
States. The German operation's customers are a diverse group of
operators of wall machines and amusement games at arcades, hotels,
restaurants and taverns, primarily in Germany. Gaming Equipment and
Systems' customers are primarily casinos and gaming machine
distributors in the United States and abroad. Receivables of the German
operations and Gaming Equipment and Systems are generally
collateralized by the related equipment. See "Concentration of Credit
Risk".
The table below presents information as to the Company's identifiable
assets at June 30, 1996 and 1997, and revenues, operating income,
capital expenditures and depreciation and amortization by geographic
region for the year ended June 30, 1997. As the operations from BGII
were consolidated for only the last twelve days of the year ended June
30, 1996, the geographic segment information related to the statements
of operations is not material and has not been presented for fiscal
year 1996.
<TABLE>
<CAPTION>
At June 30,
--------------------------
1996 1997
--------- ---------
<S> <C> <C>
(In 000's)
Identifiable assets:
Germany $ 107,545 $ 110,371
United States 267,959 242,450
Eliminations - (805)
--------- ---------
Consolidated $ 375,504 $ 352,016
========= =========
</TABLE>
F-21
<PAGE> 79
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
Year ended June 30, 1997
--------------------------------------------------------------
(In 000's)
Operating Capital Depreciation and
Revenues Income (Loss) Expenditures Amortization
--------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
Germany $ 142,961 $ 23,356 $ 2,091 $ 6,579
United States 311,334 19,346 11,166 16,027
Eliminations (9,149) (1,243) - -
--------- --------- --------- ---------
Consolidated $ 445,146 $ 41,459 $ 13,257 $ 22,606
========= ========= ========= =========
</TABLE>
12. INTERIM FINANCIAL INFORMATION (UNAUDITED)
Following is the unaudited quarterly results of the Company for the
years ended June 30, 1996 and 1997. This information is not covered by
the Independent Auditors' Report.
<TABLE>
<CAPTION>
Quarter
------------------------------------------------------------
First Second Third Fourth
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(In 000's, except per share data)
1996
----
Revenues $ 38,541 $ 37,687 $ 40,568 $ 55,582
Operating loss (1,465) (2,059) (2,348) (41,212)
Net loss (3,418) (6,013) (5,398) (45,068)
Net loss applicable to common shares (3,418) (6,013) (5,398) (45,430)
Loss per share (.29) (.50) (.42) (3.43)
1997
----
Revenues $ 102,912 $ 128,703 $ 101,691 $ 111,840
Operating income 8,956 13,909 8,882 9,712
Net income 635 4,145 561 444
Net income (loss) applicable to common shares (2,261) 1,051 (2,420) (2,559)
Income (loss) per share (.07) .03 (.08) (.08)
</TABLE>
13. CONSOLIDATING FINANCIAL STATEMENTS
The following consolidating financial statements are presented to
provide certain financial information regarding guaranteeing and
non-guaranteeing subsidiaries in relation to the Company's Senior
Subordinated Notes which were issued in the Refinancing transaction
completed in August 1997 (see note 4). The financial information
presented includes Alliance Gaming Corporation (the "Parent") and its
wholly-owned guaranteeing subsidiaries (together the "Parent and
Guaranteeing Subsidiaries"), and the non-guaranteeing subsidiaries
Video Services, Inc., United Gaming Rainbow, BGI Australia Pty.
Limited, Bally Gaming de Puerto Rico, Inc., and Alliance Automaten GmbH
& Co. KG (the subsidiary that holds the Company's German interests)
(together the "Non-Guaranteeing Subsidiaries"). The notes to
consolidating financial statements should be read in conjunction with
these consolidating financial statements.
F-22
<PAGE> 80
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING BALANCE SHEETS
June 30, 1996
(In 000's)
ASSETS
<TABLE>
<CAPTION>
Alliance
Gaming
Parent and Non- Corporation
Guaranteeing Guaranteeing Adjust- and
Subsidiaries Subsidiaries ments Subsidiaries
------------ ------------ --------- ------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 36,954 $ 11,103 $ - $ 48,057
Accounts and notes receivable, net 39,327 55,473 (1,298) 93,502
Inventories, net 23,818 17,838 - 41,656
Other current assets 6,274 2,080 - 8,354
--------- --------- --------- ---------
Total current assets 106,373 86,494 (1,298) 191,569
--------- --------- --------- ---------
Long-term notes receivable, net 97,227 1,773 (84,816) 14,184
Leased equipment, net - 3,507 - 3,507
Property, plant and equipment, net 39,170 35,407 - 74,577
Excess of costs over net assets of acquired
businesses, net 36,890 23,402 - 60,292
Intangible assets, net 19,826 421 - 20,247
Investments in subsidiaries 98,599 - (98,599) -
Deferred tax assets 4,131 1,328 - 5,459
Other assets, net 14,088 (5,521) (2,898) 5,669
--------- --------- --------- ---------
$ 416,304 $ 146,811 $(187,611) $ 375,504
========= ========= ========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 14,361 $ 4,439 $ (2,560) $ 16,240
Accrued liabilities 29,635 10,549 (1,641) 38,543
Current maturities of long-term debt 8,200 17,577 - 25,777
--------- --------- --------- ---------
Total current liabilities 52,196 32,565 (4,201) 80,560
--------- --------- --------- ---------
Senior Secured Notes due 2003, net 150,929 - - 150,929
Other long-term debt, less current maturities 83,289 15,647 (84,298) 14,638
Deferred tax liabilities 4,731 - - 4,731
Other liabilities 2,613 - (513) 2,100
--------- --------- --------- ---------
Total liabilities 293,758 48,212 (89,012) 252,958
--------- --------- --------- ---------
Minority interest 1,148 - - 1,148
Series B Special Stock 51,552 - - 51,552
Commitments and contingencies
Stockholders' equity:
Series E Special Stock 11,316 - - 11,316
Common Stock 3,176 17,832 (17,832) 3,176
Additional paid-in-capital 139,031 70,373 (70,373) 139,031
Cumulative translation adjustment (287) (314) 314 (287)
Retained earnings (accumulated deficit) (83,390) 10,708 (10,708) (83,390)
--------- --------- --------- ---------
Total stockholders' equity 69,846 98,599 (98,599) 69,846
--------- --------- --------- ---------
$ 416,304 $ 146,811 $(187,611) $ 375,504
========= ========= ========= =========
</TABLE>
See accompanying notes
F-23
<PAGE> 81
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING BALANCE SHEETS
June 30, 1997
(In 000's)
ASSETS
<TABLE>
<CAPTION>
Alliance
Gaming
Parent and Non- Corporation
Guaranteeing Guaranteeing Adjust- and
Subsidiaries Subsidiaries ments Subsidiaries
------------ ------------ --------- ------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 16,462 $ 12,462 $ - $ 28,924
Accounts and notes receivable, net 31,799 57,207 (1,305) 87,701
Inventories, net 19,231 18,778 (680) 37,329
Other current assets 6,695 2,932 - 9,627
--------- --------- --------- ---------
Total current assets 74,187 91,379 (1,985) 163,581
--------- --------- --------- ---------
Long-term notes receivable, net 96,271 1,501 (88,791) 8,981
Leased equipment, net - 7,902 - 7,902
Property, plant and equipment, net 41,836 32,811 - 74,647
Excess of costs over net assets of acquired businesses,
net 41,185 21,031 (118) 62,098
Intangible assets, net 17,979 252 - 18,231
Investment in subsidiaries 100,478 - (100,478) -
Deferred tax assets 6,265 5,511 - 11,776
Other assets, net 16,045 (11,269) 24 4,800
--------- --------- --------- ---------
$ 394,246 $ 149,118 $(191,348) $ 352,016
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,936 $ 4,262 $ 72 $ 14,270
Accrued liabilities 21,129 16,727 (464) 37,392
Current maturities of long-term debt 585 1,348 (809) 1,124
--------- --------- --------- ---------
Total current liabilities 31,650 22,337 (1,201) 52,786
--------- --------- --------- ---------
Senior Secured Notes due 2003, net 151,224 - - 151,224
Other long-term debt, less current maturities 87,924 22,676 (89,109) 21,491
Deferred tax liabilities 6,865 3,500 - 10,365
Other liabilities 2,501 - (433) 2,068
--------- --------- --------- ---------
Total liabilities 280,164 48,513 (90,743) 237,934
--------- --------- --------- ---------
Minority interest 1,546 - - 1,546
Series B Special Stock 58,981 - - 58,981
Commitments and contingencies
Stockholders' equity:
Series E Special Stock 12,368 - - 12,368
Common Stock 3,185 17,832 (17,832) 3,185
Additional paid-in capital 138,590 68,699 (68,699) 138,590
Cumulative translation adjustment (11,719) (11,880) 11,880 (11,719)
Retained earnings (accumulated deficit) (88,869) 25,954 (25,954) (88,869)
--------- --------- --------- ---------
Total stockholders' equity 53,555 100,605 (100,605) 53,555
--------- --------- --------- ---------
$ 394,246 $ 149,118 $(191,348) $ 352,016
========= ========= ========= =========
</TABLE>
See accompanying notes.
F-24
<PAGE> 82
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING STATEMENTS OF OPERATIONS
Year ended June 30, 1995
(In 000's)
<TABLE>
<CAPTION>
Alliance
Gaming
Parent and Non- Corporation
Guaranteeing Guaranteeing Adjust- and
Subsidiaries Subsidiaries ments Subsidiaries
------------ ------------ --------- ------------
<S> <C> <C> <C> <C>
Revenues:
Route operations $ 92,034 $ 14,820 $ --- $ 106,854
Casino operations 20,698 4,436 --- 25,134
--------- --------- --------- ---------
112,732 19,256 --- 131,988
--------- --------- --------- ---------
Costs and expenses:
Cost of route operations 70,649 9,238 --- 79,887
Cost of casino operations 12,047 2,184 --- 14,231
Selling, general and administrative 25,627 2,964 (342) 28,249
Provision for doubtful receivables 387 13 --- 400
Depreciation and amortization 8,175 1,345 --- 9,520
Direct acquisition costs 1,669 --- --- 1,669
Unusual items 2,293 --- --- 2,293
--------- --------- --------- ---------
120,847 15,744 (342) 136,249
--------- --------- --------- ---------
Operating income (loss) (8,115) 3,512 342 (4,261)
Earnings in consolidated subsidiaries 1,208 --- (1,208) ---
Other income (expense):
Interest income 2,786 115 (103) 2,798
Interest expense (7,131) (1,105) 103 (8,133)
Rainbow royalty --- (810) --- (810)
Minority interest (397) --- --- (397)
Other, net 464 195 (342) 317
--------- --------- --------- ---------
Income (loss) before income taxes (11,185) 1,907 (1,208) (10,486)
Income tax benefit (provision) 434 (699) --- (265)
--------- --------- --------- ---------
Net income (loss) $ (10,751) $ 1,208 $ (1,208) $ (10,751)
========= ========= ========= =========
</TABLE>
See accompanying notes.
F-25
<PAGE> 83
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING STATEMENTS OF OPERATIONS
Year ended June 30, 1996
(In 000's)
Alliance
<TABLE>
<CAPTION>
Alliance
Gaming
Parent and Non- Corporation
Guaranteeing Guaranteeing Adjust- and
Subsidiaries Subsidiaries ments Subsidiaries
------------ ------------ --------- ------------
<S> <C> <C> <C> <C>
Revenues:
Gaming equipment and systems $ 11,700 $ 1,223 $ (2,348) $ 10,575
Wall machines and amusement games --- 3,356 --- 3,356
Route operations 93,037 16,901 --- 109,938
Casino operations 14,747 33,862 (100) 48,509
--------- --------- --------- ---------
119,484 55,342 (2,448) 172,378
--------- --------- --------- ---------
Costs and expenses:
Cost of gaming equipment and systems 8,531 1,030 (2,348) 7,213
Cost of wall machines and amusement games --- 2,022 --- 2,022
Cost of route operations 73,436 10,776 --- 84,212
Cost of casino operations 9,722 12,324 --- 22,046
Selling, general and administrative 18,915 11,797 (92) 30,620
Provision for doubtful receivables 973 47 --- 1,020
Depreciation and amortization 8,746 2,242 --- 10,988
Direct acquisition costs 55,843 --- --- 55,843
Unusual items 5,498 --- --- 5,498
--------- --------- --------- ---------
181,664 40,238 (2,440) 219,462
--------- --------- --------- ---------
Operating income (loss) (62,180) 15,104 (8) (47,084)
Earnings in consolidated subsidiaries 8,378 --- (8,378) ---
Other income (expense):
Interest income 1,654 391 (474) 1,571
Interest expense (7,407) (1,964) 474 (8,897)
Rainbow royalty --- (4,070) --- (4,070)
Minority interest (963) --- --- (963)
Other, net 987 209 (895) 301
--------- --------- --------- ---------
Income (loss) before income taxes (59,531) 9,670 (9,281) (59,142)
Income tax benefit (provision) (366) (1,292) 903 (755)
--------- --------- --------- ---------
Net income (loss) (59,897) 8,378 (8,378) (59,897)
--------- --------- --------- ---------
Special Stock dividends (362) --- --- (362)
--------- --------- --------- ---------
Net loss applicable to common shares $ (60,259) $ 8,378 $ (8,378) $ (60,259)
========= ========= ========= =========
</TABLE>
See accompanying notes.
F-26
<PAGE> 84
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING STATEMENTS OF OPERATIONS
Year ended June 30, 1997
(In 000's)
<TABLE>
<CAPTION>
Alliance
Gaming
Parent and Non- Corporation
Guaranteeing Guaranteeing Adjust- and
Subsidiaries Subsidiaries ments Subsidiaries
------------ ------------ ----- ------------
<S> <C> <C> <C> <C>
Revenues:
Gaming equipment and systems $ 130,764 $ 11,070 $ (7,100) $ 134,734
Wall machines and amusement games -- 131,954 (20) 131,934
Route operations 108,148 18,880 -- 127,028
Casino operations 11,738 39,712 -- 51,450
--------- --------- --------- ---------
250,650 201,616 (7,120) 445,146
--------- --------- --------- ---------
Costs and expenses:
Cost of gaming equipment and systems 82,673 8,796 (6,973) 84,496
Cost of wall machines and amusement games -- 68,437 (11) 68,426
Cost of route operations 83,592 12,124 -- 95,716
Cost of casino operations 7,528 14,741 -- 22,269
Selling, general and administrative 55,565 44,859 (9) 100,415
Provision for doubtful receivables 5,049 4,010 -- 9,059
Depreciation and amortization 13,390 9,216 -- 22,606
Unusual items 700 -- -- 700
--------- --------- --------- ---------
248,497 162,183 (6,993) 403,687
--------- --------- --------- ---------
Operating income (loss) 2,153 39,433 (127) 41,459
Earnings in consolidated subsidiaries 23,497 -- (23,497) --
Other income (expense):
Interest income 1,635 369 (384) 1,620
Interest expense (21,042) (2,968) 384 (23,626)
Rainbow royalty -- (4,722) -- (4,722)
Minority interest (1,092) -- -- (1,092)
Other, net 135 4 -- 139
--------- --------- --------- ---------
Income (loss) before income taxes 5,286 32,116 (23,624) 13,778
Income tax benefit (provision) 499 (8,492) -- (7,993)
--------- --------- --------- ---------
Net income (loss) 5,785 23,624 (23,624) 5,785
Special Stock dividends (11,974) -- -- (11,974)
--------- --------- --------- ---------
Net loss applicable to common shares $ (6,189) $ 23,624 $ (23,624) $ (6,189)
========= ========= ========= =========
</TABLE>
See accompanying notes.
F-27
<PAGE> 85
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING STATEMENTS OF CASH FLOWS
Year ended June 30, 1995
(In 000's)
<TABLE>
<CAPTION>
Alliance
Gaming
Parent and Non- Corporation
Guaranteeing Guaranteeing Adjust- and
Subsidiaries Subsidiaries ments Subsidiaries
------------ ------------ ----- ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(10,751) $ 1,208 $ (1,208) $(10,751)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 8,175 1,345 -- 9,520
Amortization of debt discounts 62 235 -- 297
Write down of other assets 2,892 (96) -- 2,796
Provision for doubtful receivables 387 13 -- 400
Other 1,282 -- -- 1,282
Change in operating assets and liabilities,
net of effects of business acquired:
Accounts and notes receivable 1,530 66 (251) 1,345
Inventories (40) -- -- (40)
Other current assets 251 4 -- 255
Accounts payable (254) (193) -- (447)
Accrued expenses (2,540) 185 -- (2,355)
Intercompany accounts (3,040) 249 2,791 --
-------- -------- -------- --------
Net cash provided by (used in)
operating activities (2,046) 3,016 1,332 2,302
-------- -------- -------- --------
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired -- 2,481 -- 2,481
Additions to property and equipment (7,643) (1,244) -- (8,887)
Proceeds from disposal of property and equipment 225 126 -- 351
Purchases of securities available for sale (11,086) -- -- (11,086)
Other (5,852) -- -- (5,852)
-------- -------- -------- --------
Net cash provided by (used in)
investing activities (24,356) 1,363 -- (22,993)
-------- -------- -------- --------
Cash flows from financing activities:
Proceeds from long-term debt, net of expenses -- 1,504 (1,504) --
Reduction of long-term debt (578) (2,719) 172 (3,125)
Issuance of common stock 465 -- -- 465
-------- -------- -------- --------
Net cash used in
financing activities (113) (1,215) (1,332) (2,660)
-------- -------- -------- --------
Cash and cash equivalents:
Increase (decrease) for year (26,515) 3,164 -- (23,351)
Balance, beginning of year 34,750 2,335 -- 37,085
-------- -------- -------- --------
Balance, end of year $ 8,235 $ 5,499 $ -- $ 13,734
======== ======== ======== ========
</TABLE>
See accompanying notes.
F-28
<PAGE> 86
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING STATEMENTS OF CASH FLOWS
Year ended June 30, 1996
(In 000's)
<TABLE>
<CAPTION>
Alliance
Gaming
Parent and Non- Corporation
Guaranteeing Guaranteeing Adjust- and
Subsidiaries Subsidiaries ments Subsidiaries
------------ ------------ --------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (59,897) $ 8,378 $ (8,378) $ (59,897)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 8,746 2,242 - 10,988
Amortization of debt discounts 9 236 - 245
Loss on debenture conversion 30,079 - - 30,079
Write down of other assets 6,117 (22) - 6,095
(Gain) loss on sale of property and equipment (13) 118 - 105
Provision for doubtful receivables 973 47 - 1,020
Other 2,839 (1,295) - 1,544
Change in operating assets and liabilities, net of
effects of business acquired:
Accounts and notes receivable (3,642) (2,389) 97 (5,934)
Inventories 5,754 90 - 5,844
Other current assets (1,508) 1,413 - (95)
Intercompany accounts (7,038) (1,340) 8,378 -
Accounts payable (3,195) 1,403 (97) (1,889)
Accrued liabilities 12,930 (174) 24 12,780
--------- --------- --------- ---------
Net cash provided by (used in) operating activities (7,846) 8,707 24 885
--------- --------- --------- ---------
Cash flows from investing activities:
Acquisition of business, net of cash acquired (79,209) - - (79,209)
Additions to property, plant and equipment (6,290) (1,811) - (8,101)
Proceeds from disposal of property and equipment 2,106 176 - 2,282
Purchases of securities available for sale 13,516 - - 13,516
Other (7,156) 2,065 - (5,091)
--------- --------- --------- ---------
Net cash provided by (used in) investing activities (77,033) 430 - (76,603)
--------- --------- --------- ---------
Cash flows from financing activities:
Proceeds from long-term debt, net of expenses 144,764 1,301 (645) 145,420
Reduction of long-term debt (47,233) (4,834) 621 (51,446)
Issuance of Special Stock 15,000 - - 15,000
Fees paid for conversion of convertible debentures (3,333) - - (3,333)
Issuance of Common Stock 4,400 - - 4,400
--------- --------- --------- ---------
Net cash provided by (used in) financing activities 113,598 (3,533) (24) 110,041
--------- --------- --------- ---------
Cash and cash equivalents:
Increase for year 28,719 5,604 - 34,323
Balance, beginning of year 8,235 5,499 - 13,734
--------- --------- --------- ---------
Balance, end of year $ 36,954 $ 11,103 $ - $ 48,057
========= ========= ========= =========
</TABLE>
See accompanying notes.
F-29
<PAGE> 87
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING STATEMENTS OF CASH FLOWS
Year ended June 30, 1997
(In 000's)
<TABLE>
<CAPTION>
Alliance
Gaming
Parent and Non- Corporation
Guaranteeing Guaranteeing Adjust- and
Subsidiaries Subsidiaries ments Subsidiaries
------------ ------------ --------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 5,785 $ 23,624 $(23,624) $ 5,785
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 13,390 9,216 - 22,606
Amortization of debt discounts 295 512 - 807
Write down of other assets 803 272 - 1,075
Loss on sale of property and equipment 503 730 - 1,233
Provision for doubtful receivables 5,049 4,010 - 9,059
Other 32 (683) - (651)
Change in operating assets and liabilities, net of effects of business
acquired:
Accounts and notes receivable 1,912 (10,495) 3,982 (4,601)
Inventories 4,587 (12,165) 680 (6,898)
Other current assets (287) (1,262) - (1,549)
Intercompany accounts (20,345) 5,673 14,672 -
Accounts payable (4,425) (177) 2,632 (1,970)
Accrued liabilities (8,943) 7,269 914 (760)
-------- -------- -------- --------
Net cash provided by (used in) operating activities (1,644) 26,524 (744) 24,136
-------- -------- -------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (9,198) (4,059) - (13,257)
Proceeds from disposal of property and equipment 78 176 - 254
Other (8,375) (199) - (8,574)
-------- -------- -------- --------
Net cash provided by (used in) investing activities (17,495) (4,082) - (21,577)
-------- -------- -------- --------
Cash flows from financing activities:
Net change in credit lines (7,525) (4,053) (11,578)
Reduction of long-term debt (767) (6,751) 744 (6,774)
Proceeds from exercise of stock options 767 - - 767
Repurchase of Series B Special Stock (3,879) - - (3,879)
Dividends (paid) received 10,051 (10,051) - -
-------- -------- -------- --------
Net cash provided by (used in) financing activities (1,353) (20,855) 744 (21,464)
-------- -------- -------- --------
Effect of exchange rates on cash - (228) (228)
Cash and cash equivalents:
Increase for year (20,492) 1,359 - (19,133)
Balance, beginning of year 36,954 11,103 - 48,057
-------- -------- -------- --------
Balance, end of year $ 16,462 $ 12,462 $ - $ 28,924
======== ======== ======== ========
</TABLE>
See accompanying notes.
F-30
<PAGE> 88
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1995, 1996 AND 1997
BASIS OF PRESENTATION
These notes to consolidating financial statements should be read in conjunction
with the consolidated financial statements and notes thereto. Certain
reclassifications have been made to prior years' financial statements to conform
with the current year presentation.
DEBT AND LINES OF CREDIT
Long-term debt and lines of credit at June 30, 1997 consist of the following :
<TABLE>
<CAPTION>
Alliance
Gaming
Parent and Non- Corporation
Guaranteeing Guaranteeing Adjust- and
Subsidiaries Subsidiaries ments Subsidiaries
------------ ------------ ----- ------------
(in 000's)
<S> <C> <C> <C> <C>
12 7/8% Senior Secured notes due
2003 net of unamortized discount $ 151,224 $ 151,224
7.5% Convertible subordinated
debentures due 2003, unsecured 1,642 1,642
Hospitality Franchise Systems
note payable 6,569 6,569
Bally Wulff revolving lines of credit 9,611 9,611
Intercompany notes payable 85,815 4,103 (89,918) --
Other 1,052 3,741 4,793
--------- --------- --------- ---------
239,733 24,024 (89,918) 173,839
Less current maturities 585 1,348 (809) 1,124
--------- --------- --------- ---------
Long-term debt, less current
maturities $ 239,148 $ 22,676 $ (89,109) $ 172,715
========= ========= ========= =========
</TABLE>
INCOME TAXES
The federal, foreign and state income tax effects of temporary differences that
give rise to significant portions of the deferred tax assets and liabilities as
of June 30, 1996 are as follows:
<TABLE>
<CAPTION>
Alliance
Gaming
Parent and Non- Corporation
Guaranteeing Guaranteeing Adjust- and
Subsidiaries Subsidiaries ments Subsidiaries
------------ ------------ ----- ------------
<S> <C> <C> <C> <C>
Deferred Tax Assets: (in 000's)
Net operating loss carry forwards $ 8,923 $ $ $ 8,923
Inventory obsolescence reserves 3,070 651 3,721
Bad debt reserves 4,719 4,719
Foreign tax credit carry forwards 11,843 11,843
Reserves for abandoned projects 1,863 1,863
Accruals not currently deductible
for tax purposes 2,831 2,831
Other 918 1,169 2,087
-------- -------- -------- --------
Total gross deferred tax assets 34,167 1,820 35,987
Less: Valuation allowance (30,036) (492) (30,528)
-------- -------- -------- --------
Deferred tax assets $ 4,131 $ 1,328 $ $ 5,459
-------- -------- -------- --------
</TABLE>
F-31
<PAGE> 89
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<S> <C> <C> <C> <C>
Deferred Tax Liabilities:
Property and equipment, principally
due to depreciation differences $ 3,172 $ 3,172
Other 1,559 1,559
-------- -------- -------- --------
Total gross deferred tax liabilities 4,731 4,731
-------- -------- --------
Net deferred tax assets (liabilities) $ (600) $ 1,328 $ $ 728
======== ======== ======== ========
</TABLE>
The federal, foreign and state income tax effects of temporary differences that
give rise to significant portions of the deferred tax assets and liabilities as
of June 30, 1997 are as follows (in 000's):
<TABLE>
<CAPTION>
Alliance
Gaming
Parent and Non- Corporation
Guaranteeing Guaranteeing Adjust- and
Subsidiaries Subsidiaries ments Subsidiaries
------------ ------------ ----- ------------
<S> <C> <C> <C> <C>
Deferred Tax Assets:
Net operating loss carry forwards $ 7,510 $ $ $ 7,510
Inventory obsolescence reserves 3,400 648 4,048
Bad debt reserves 6,359 6,359
Foreign tax credit carry forwards 11,843 11,843
Reserves for abandoned projects 1,311 1,311
Accruals not currently deductible
for tax purposes 3,581 3,581
Other 2,937 4,863 7,800
-------- -------- -------- --------
Total gross deferred tax assets 36,941 5,511 42,452
Less: Valuation allowance (30,676) (30,676)
-------- -------- -------- --------
Deferred tax assets $ 6,265 $ 5,511 $ -- $ 11,776
-------- -------- -------- --------
Deferred Tax Liabilities:
Property and equipment, principally
due to depreciation differences $ 3,703 $ $ $ 3,703
Other 3,162 3,500 6,662
-------- -------- -------- --------
Total gross deferred tax liabilities 6,865 3,500 -- 10,365
-------- -------- --------
Net deferred tax assets (liabilities) $ (600) $ 2,011 $ -- $ 1,411
======== ======== ======== ========
</TABLE>
F-32
<PAGE> 90
ALLIANCE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. RESERVES AND ALLOWANCES
The following tables represent the activity for each of the fiscal years ended
June 30, 1995, 1996 and 1997 for each of the valuation reserve and allowance
accounts (in 000's):
<TABLE>
<CAPTION>
Balance at Balance at
Beginning of End of
Year Additions Deductions Year
---- --------- ---------- ----
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended June 30, 1997 $19,497 $ 9,179 $ 4,775 $23,901
Year ended June 30, 1996 1,659 18,995 (a) 1,157 19,497
Year ended June 30, 1995 1,389 1,258 988 1,659
Inventory valuation allowance:
Year ended June 30, 1997 $ 9,484 $ 1,719 $ 2,347 $ 8,856
Year ended June 30, 1996 -- 11,315 (a) 1,831 9,484
Other assets valuation reserve:
Year ended June 30, 1997 $ 3,679 $ 162 $ 339 $ 3,502
Year ended June 30, 1996 631 4,629 1,581 3,679
Year ended June 30, 1995 1,762 213 1,344 631
</TABLE>
(a) Includes reserves assigned to BGII receivables and inventory in
purchase accounting of $17.6 million and $9.8 million, respectively.
F-33
<PAGE> 1
EXHIBIT 4.1
INDENTURE dated as of August 8, 1997 between Alliance Gaming
Corporation, a Nevada corporation (the "Company"), the Guarantors (as defined
below) and United States Trust Company of New York (the "Trustee").
The Company, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the 10% Series A Senior Subordinated Notes due 2007 (the "Series A Notes") and
the 10% Series B Senior Subordinated Notes due 2007 (the "Series B Notes" and,
together with the Series A Notes, the "Notes"):
ARTICLE I
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition
of any assets or rights (including, without limitation, by way of a sale and
leaseback) other than dispositions of assets or rights in the ordinary course of
business, including, without limitation, sales of inventory and damaged, surplus
or obsolete property in the ordinary course of business, provided, however, that
the sale, lease, conveyance or other disposition of all or substantially all of
the assets of the Company and its Restricted Subsidiaries taken as a whole shall
not be deemed to be an "Asset Sale", and shall be governed by Sections 4.15
and/or 5.01 hereof, and (ii) the issue or sale by the Company or any of its
Restricted Subsidiaries of Equity Interests of any of the Company's Restricted
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $100,000 or (b) for net proceeds in excess of $100,000.
Notwithstanding the foregoing, the following will not be deemed to be "Asset
Sales": (i) a transfer of assets or rights by the Company to a Wholly Owned
Restricted Subsidiary or a Guarantor, or by a
<PAGE> 2
Restricted Subsidiary to the Company or to a Wholly Owned Restricted Subsidiary
or a Guarantor, (ii) an issuance of Equity Interests by a Wholly Owned
Restricted Subsidiary or a Guarantor to the Company or to a Wholly Owned
Restricted Subsidiary or a Guarantor, (iii) a Restricted Payment that is
permitted by Section 4.07 hereof and (iv) a Permitted Investment.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Bally Wulff" means, collectively, Alliance Automaten GmbH & Co. KG,
Bally Wulff Vertriebs GmbH, Bally Wulff Automaten GmbH, Geda
Automatengrosshandel GmbH, Erkens Vertriebs GmbH, Bally Gaming International
GmbH, Kuepper GmbH and Westav Westdeutscher Vertriebs GmbH.
"Board of Directors" means the Board of Directors of the Company, or any
authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, 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 on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means (i) United States dollars and German
Deutschemarks (or the Euro, if and when such currency replaces the German
Deutschemark), (ii) securities issued or directly fully guaranteed or insured by
the United States government or any agency or instrumentality thereof having
maturities of not more than six months from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any domestic commercial bank or commercial bank of a foreign country
recognized by the United States, in each case having capital and surplus in
excess of $500 million (or the foreign currency equivalent thereof) and having
outstanding debt which is rated "A" (or similar equivalent thereof) or higher by
at least one nationally recognized statistical rating organization (as defined
under Rule 436 under the Securities Act) or any money-market fund sponsored by a
registered broker dealer or mutual fund distributor, (iv) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clauses (ii) and (iii) above entered into with any financial
institution meeting the qualifications specified in clause (iii) above and (v)
commercial paper having one of the two highest ratings obtainable from Moody's
Investors
2
<PAGE> 3
Service, Inc. or Standard & Poor's Corporation and in each case maturing within
six months after the date of acquisition.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than an Exempt Person, (ii) the adoption of a plan
relating to the liquidation or dissolution of the Company, (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined above),
other than an Exempt Person, becomes the "beneficial owner" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a
person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of 50% or more of the Voting Stock of the
Company (measured by voting power rather than number of shares), (iv) during any
period of 12 consecutive months after the date of this Indenture, individuals
who at the beginning of any such 12-month period constituted the Board of
Directors of the Company, together with any Continuing Directors, cease for any
reason to constitute a majority of the Board of Directors of the Company then in
office; and (v) the Company consolidates with, or merges with or into, any
Person or sells, assigns, conveys, transfers, leases or otherwise disposes of
all or substantially all of its assets to any Person, or any Person consolidates
with, or merges with or into, the Company, in any such event pursuant to a
transaction in which any of the outstanding Voting Stock of the Company is
converted into or exchanged for cash, securities or other property, other than
any such transaction where the Voting Stock of the Company outstanding
immediately prior to such transaction is converted into or exchanged for Voting
Stock of the surviving or transferee Person constituting a majority of the
outstanding shares of such Voting Stock of such surviving or transferee Person
(immediately after giving effect to such issuance), but only if the condition
specified in clause (iv) also has occurred.
"Company" means Alliance Gaming Corporation, a Nevada corporation, or
any successor pursuant to Section 5.02 hereof.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus (i) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Interest Swap and Hedging Obligations), to the extent that any such expense
was deducted
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in computing such Consolidated Net Income, plus (iv) depreciation and
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) of such Person and its Subsidiaries for such period to the extent that
such depreciation and amortization were deducted in computing such Consolidated
Net Income, plus (v) prepayment premiums and other charges incurred in
connection with the Refinancing. Notwithstanding the foregoing, the provision
for taxes on the income or profits of, and the depreciation and amortization of,
a Subsidiary of the referent Person shall be added to Consolidated Net Income to
compute Consolidated Cash Flow only to the extent that a corresponding amount
would be permitted at the date of determination to be dividended or distributed
to the Company by such Subsidiary without prior governmental approval (that has
not been obtained), and without direct or indirect restriction pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to that
Subsidiary or its stockholders.
"Consolidated Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Consolidated Interest Expense of
such Person and its Restricted Subsidiaries for such period. In the event that
the Company or any of its Restricted Subsidiaries incurs, assumes, Guarantees,
repays, redeems, retires, repurchases or defeases any Indebtedness or
Disqualified Stock (other than revolving credit borrowings) or issues preferred
stock subsequent to the commencement of the period for which the Consolidated
Coverage Ratio is being calculated but prior to the date on which the event for
which the calculation of the Consolidated Coverage Ratio is made (the
"Calculation Date"), then the Consolidated Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee, repayment
redemption, retirement, repurchase or defeasance of Indebtedness or Disqualified
Stock, or such issuance or redemption of preferred stock, as if the same had
occurred at the beginning of the applicable four-quarter reference period. In
addition, for purposes of making the computation referred to above, (i)
acquisitions of and investments in Restricted Subsidiaries that have been made
by the Company or any of its Restricted Subsidiaries, including through mergers
or investments or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period and Consolidated
Cash Flow for such reference period shall be calculated without giving effect to
clause (iii) of the proviso set forth in the definition of Consolidated Net
Income, (ii) the Consolidated Cash Flow attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded and (iii) the Consolidated
Interest Expense attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Consolidated Interest Expense will not be obligations of the
referent Person or any of its Restricted Subsidiaries following the Calculation
Date. For purposes of this definition, whenever pro forma effect is to be given
to an acquisition of assets, the amount of income or earnings relating thereto
and the amount of Consolidated Interest Expense associated with any Indebtedness
incurred in connection therewith, the pro forma calculations shall be determined
in good faith by a responsible financial or accounting officer of the Company.
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"Consolidated Interest Expense" means, with respect to any Person for
any period, the sum, without duplication, of (i) the consolidated interest
expense of such Person and its Restricted Subsidiaries for such period, whether
paid or accrued (including, without limitation, amortization of original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Interest Swap and Hedging Obligations) and
(ii) the consolidated interest expense of such Person and its Restricted
Subsidiaries that was capitalized during such period, and (iii) any interest
expense on Indebtedness of another Person that is Guaranteed by such Person or
one of its Restricted Subsidiaries or secured by a Lien on assets of such Person
or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is
called upon), and (iv) all dividend payments, whether or not in cash, on any
series of Disqualified Stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests payable solely in
Equity Interests of the Company.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (to the extent positive) of any
Person that is not a Restricted 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 paid in cash to the referent Person or a
Restricted Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary
shall be excluded to the extent that the declaration or payment of dividends and
distributions by that Restricted Subsidiary of Net Income is not at the date of
determination permitted without any prior governmental approval (that has not
been obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income or loss of any Unrestricted Subsidiary shall
be excluded, whether or not distributed to the Company or one of its
Subsidiaries, (iv) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded and (v) the cumulative effect of a change in accounting principles
shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings, but only to the extent of any
cash received by such Person upon issuance of such preferred stock.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of this Indenture or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
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"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 13.02 hereof or such other address as to which the
Trustee may give written notice to the Company.
"Credit Facilities" means, with respect to any Person, one or more debt
facilities (including, without limitation, the New Credit Facility) or
commercial paper facilities with banks or other institutional lenders as agent
providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time. Indebtedness under
Credit Facilities outstanding on the date on which Notes are first issued and
authenticated under this Indenture shall be deemed to have been incurred on such
date in reliance on the exception provided by clauses (i) and (ii) of the
definition of Permitted Debt.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Definitive Notes" means Notes that are in the form of the Notes
attached hereto as Exhibit A, that do not include the information called for by
footnotes 1 and 2 thereof.
"Depository" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depository with respect to the Notes, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depository" shall mean or include such successor.
"Designated Senior Debt" means (i) any Indebtedness outstanding under
the New Credit Facility; provided that Indebtedness outstanding under any Credit
Facility that refinanced in part, but not in whole, the Indebtedness outstanding
under the New Credit Facility shall constitute Designated Senior Debt only if it
meets the requirements of succeeding clause (ii), and (ii) any other Senior Debt
of the Company which, at the date of determination, has an aggregate principal
amount outstanding of, or under which, at the date of determination, the holders
thereof are committed to lend up to at least $25.0 million and is specifically
designated by the Company in the instrument evidencing or governing such Senior
Debt as "Designated Senior Debt" for purposes of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable other than at the Company's option), or upon the happening of any
event (other than the disqualification of the holder thereof by a Gaming
Authority), matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the Holder thereof,
in whole or in part, on or prior to the first anniversary of
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<PAGE> 7
the Stated Maturity of the Notes other than for Equity Interests (other than
Disqualified Stock); provided, however, that any Capital Stock that would not
constitute Disqualified Stock but for provisions thereof giving holders thereof
the right to require such Person to repurchase or redeem such Capital Stock upon
the occurrence of an "asset sale" or "change of control" occurring prior to the
first anniversary of the Stated Maturity of the Notes shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are not more favorable to the holders of such
Capital Stock than the provisions set forth in Sections 4.10 and 4.15.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means an underwritten primary offering of common stock
of the Company pursuant to an effective registration statement, or a private
placement of common stock exempt from registration, under the Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the offer that may be made by the Company
pursuant to the Registration Rights Agreement to exchange Series B Notes for
Series A Notes.
"Exempt Affiliate Transactions" means (i) any extension or renewal in
accordance with their terms, of those certain Employment Agreements dated as of
July 1, 1997 between the Company and each of Anthony L. DiCesare and Joel
Kirschbaum (collectively, the "Employment Agreements") and that certain letter
agreement dated July 1, 1997 between the Company and Kirkland Investment
Corporation providing for the payment of overhead expenses, as well as any
restructuring of the Employment Agreements, provided that, in the case of a
restructuring of any Employment Agreement, the Board of Directors has determined
that the restructured terms are fair to the Company and, if the restructuring
involves aggregate consideration in excess of $10.0 million, the Company
delivers a fairness opinion of the type specified in clause (b) of Section 4.11
and (ii) any agreements between the Company and Alfred H. Wilms or any of his
Affiliates providing for the payment by the Company of consulting fees or
similar fees in an aggregate amount not to exceed $500,000 per annum.
"Exempt Person" means (i) the Company or any employee benefit plan or
stock ownership plan of either the Company or any subsidiary of the Company,
(ii) any of Kirkland-Ft. Worth Investment Partners, L.P., Kirkland Investment
Corporation, Gaming Systems Advisors, L.P., Alfred H. Wilms, or any of their
respective Affiliates, or any successor to Kirkland-Ft. Worth Investment
Partners, L.P., Kirkland Investment Corporation or Gaming Systems Advisors, L.P.
or any of their respective Affiliates by merger, sale or transfer of assets or
similar transaction, or by a transfer from Alfred H. Wilms to any estate
planning vehicle controlled by Alfred H. Wilms or established for the benefit of
Alfred H. Wilms' family or his estate.
"Existing Indebtedness" means Indebtedness in existence on the date of
this Indenture, until such amounts are repaid.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified
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Public Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as have been
approved by a significant segment of the accounting profession, which are in
effect on the date of this Indenture.
"Gaming Authority" means any governmental agency which regulates gaming
in a jurisdiction in which the Company or any of its Subsidiaries conducts a
Gaming Business.
"Gaming Business" means the business conducted (or proposed to be
conducted) by the Company and its Subsidiaries as of the date of this Indenture,
including the management and operation of gaming machines and casinos, the
design, manufacture and distribution of gaming machines, equipment, monitoring
systems and amusement equipment, and other gaming- related businesses, including
but not limited to amusements, arcades, Internet-based gaming, pari-mutuel and
lottery-related activities, and any and all businesses that in the good faith
judgment of the Board of Directors of the Company are materially related
businesses.
"Gaming Licenses" means every material license, material franchise, or
other material authorization required to own, lease, operate or otherwise
conduct or manage riverboat, dockside or land-based gaming (including any
applicable liquor licenses) or to design, manufacture or distribute gaming
machines, equipment or systems in any state or jurisdiction where the Company or
any of its Subsidiaries conducts such business.
"Global Note" means a Note that contains the paragraph referred to in
footnote 1 and the additional schedule referred to in footnote 2 to the form of
the Note attached hereto as Exhibit A.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantors" means each of (i) the Subsidiaries of the Company that is a
party to this Indenture, and (ii) any other Subsidiary of the Company that
executes a Subsidiary Guarantee in accordance with Article XI hereof, and their
respective successors and assigns.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Interest Swap
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and Hedging Obligations, except any such balance that constitutes an accrued
expense or trade payable, if and to the extent any of the foregoing indebtedness
(other than letters of credit and Interest Swap and Hedging Obligations) would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP, as well as all Indebtedness of others secured by a Lien on any asset
of such Person (whether or not such indebtedness is assumed by such Person) and,
to the extent not otherwise included, the Guarantee by such Person of any
Indebtedness of any other Person. The amount of any Indebtedness outstanding as
of any date shall be (i) the accreted value thereof, in the case of any
Indebtedness that does not require current payments of interest, and (ii) the
principal amount thereof in the case of any other Indebtedness, except for
Indebtedness of others secured by a Lien on any asset of such Person, in which
case the amount of such Indebtedness shall be deemed to be the lesser of the
stated amount of such Indebtedness and the value of the assets of such Person
securing such Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time
to time, including, without limitation, the provisions of the TIA that are
deemed to be a part of and govern this instrument and any supplemental
indenture, respectively.
"Interest Swap and Hedging Obligations" means any obligation of any
person pursuant to any interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate exchange agreement,
currency exchange agreement or any other agreement or arrangement designed to
protect (and not for the purpose of speculative investment) against fluctuations
in interest rates or currency values, including, without limitation, any
arrangement whereby, directly or indirectly, such person is entitled to receive
from time to time periodic payments calculated by applying either a fixed or
floating rate of interest on a stated notional amount in exchange for periodic
payments made by such person calculated by applying a fixed or floating rate of
interest on the same notional amount.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Subsidiary of the Company, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Equity Interests of such Restricted
Subsidiary not sold or disposed of in an amount determined as provided in
Section 4.07.
"Key Subsidiaries" means United Coin Machine Co., Bally Gaming
International, Inc., Bally Gaming, Inc., Alliance Automaten GmbH & Co. KG, Bally
Wulff Vertriebs GmbH, Bally Wulff Automaten GmbH, Foreign Gaming Ventures, Inc.,
Mississippi Ventures, Inc.,
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Louisiana Ventures, Inc., Video Services, Inc., United Gaming Rainbow and
Rainbow Casino-Vicksburg Partnership, L.P.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in).
"Liquidated Damages" means all liquidated damages then owing pursuant to
Section 5 of the Registration Rights Agreement.
"Net Available Cash" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash payments received by way of a deferred
payment of principal pursuant to a note or installment receivable or otherwise
and proceeds received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and investment
banking fees, and sales commissions) and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than Indebtedness under Credit Facilities) secured by a Lien on the asset
or assets that are the subject of such Asset Sale, and any reserve for
adjustment in respect of the sale price of such asset or assets established in
accordance with GAAP.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable by the
Company as a result thereof.
"Net Income" means, 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, excluding, however, (i) any gain or loss,
together with any related provision for taxes on such gain or loss, realized in
connection with (a) any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions) or (b) the disposition of any
securities by such Person or any of its Restricted Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Restricted
Subsidiaries, (ii) any extraordinary or nonrecurring gain or loss, together with
any related provision for taxes on such extraordinary
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or nonrecurring gain or loss and (iii) prepayment premiums and other charges
incurred in connection with the Refinancing.
"New Credit Facility" means the Credit Agreement to be entered into by
and among the Company, certain of its Subsidiaries, the lenders referred to
therein and Credit Suisse First Boston, as Administrative Agent, together with
the related documents thereto (including without limitation the term loans and
revolving loans thereunder, any guarantees and security documents), as amended,
extended, renewed, restated, supplemented or otherwise modified (in whole or in
part, and without limitation as to amount terms, conditions, covenants and other
provisions) from time to time, and any agreement (and related document)
governing Indebtedness incurred to refund or refinance, in whole or in part, the
borrowings and commitments then outstanding or permitted to be outstanding under
such New Credit Facility or a successor New Credit Facility, whether by the same
or any other lender or group of lenders.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender; and (ii) no default with respect
to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
Indebtedness represented by the Notes or outstanding under the New Credit
Facility or any replacement Credit Facility) of the Company or any of its
Restricted Subsidiaries to declare a default on such other Indebtedness or cause
the payment thereof to be accelerated or payable prior to its stated maturity;
and (iii) as to which the lenders have been notified in writing that they will
not have any recourse to the stock or assets of the Company or any of its
Restricted Subsidiaries.
"Note Custodian" means the Trustee, as custodian with respect to the
Notes in global form, or any successor entity thereto.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities and amounts
payable under the documentation governing any Indebtedness.
"Offering" means the Offering of the Notes by the Company.
"Officer" means, with respect to any Person (other than the Trustee),
the Chairman of the Board, the Chief Executive Officer, the President, the Chief
Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant
Treasurer, the Controller, the Secretary or any Vice President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 13.05 hereof.
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"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
13.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Permitted Investments" means (i) any Investment in the Company, a
Wholly Owned Restricted Subsidiary of the Company or a Guarantor, in each case
that is engaged in a Gaming Business, or any Investment in the form of a loan to
a foreign Restricted Subsidiary that is engaged in a Gaming Business; (ii) any
Investment in Cash Equivalents; (iii) any Investment by the Company or any
Restricted Subsidiary of the Company in a Person, if as a result of such
Investment (a) such Person becomes a Wholly Owned Restricted Subsidiary of the
Company or a Guarantor and is engaged in a Gaming Business or (b) such Person is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company, a Wholly
Owned Restricted Subsidiary of the Company or a Guarantor and is engaged in a
Gaming Business; (iv) any Restricted Investment made as a result of the receipt
of non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with Section 4.10; (v) any acquisition of assets solely in exchange
for the issuance of Equity Interests (other than Disqualified Stock) of the
Company; (vi) payments made to consummate the transactions contemplated by that
certain agreement dated as of July 11, 1996 among HFS Gaming Corporation,
National Gaming Mississippi, Inc. and the Company; (vii) repurchase of Notes;
(viii) Investments acquired by the Company or any of its Restricted Subsidiaries
(a) in exchange for any other Investment or accounts receivable held by the
Company or such Restricted Subsidiary in connection with or as a result of a
bankruptcy workout, reorganization or recapitalization of the issuer of such
Investment or accounts receivable or (b) as a result of a foreclosure by the
Company or such Restricted Subsidiary or other transfer of title with respect to
any secured Investment in default; (ix) Investments by the Company or any of its
Restricted Subsidiaries in securities issued directly or indirectly and fully
guaranteed or insured by the United States government or any agency or
instrumentality thereof in an amount outstanding at any time equal to the net
present value of the aggregate amount of payments owed to winners of jackpots
from progressive games and having maturities that are approximately the same as
the due dates for future jackpot payments; and (x) Investments in any Person
engaged in the Gaming Business having an aggregate fair market value (measured
on the date each such Investment was made and without giving effect to
subsequent changes in value), when taken together with all other Investments
made pursuant to this clause (x) that are at the time outstanding (after giving
effect to any such Investments that are returned or repaid to the Company or to
any Restricted Subsidiary, without restriction, in cash or property on or prior
to the date of any such calculation), not to exceed an amount equal to (A) $20.0
million, plus (B) 50% of any dividends or distributions received by the Company
or any Restricted Subsidiary after the date of this Indenture from Unrestricted
Subsidiaries of the Company in excess of the full amount of all outstanding
Investments of the Company and its Restricted Subsidiaries in Unrestricted
Subsidiaries, provided that such dividends may be used to make an Investment
only if the Consolidated Coverage Ratio for the Company's most recently ended
four full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such Investment is made would have been
at least 2.25 to 1.
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<PAGE> 13
"Permitted Refinancing Indebtedness" means any Indebtedness or
Disqualified Stock of the Company or any of its Restricted Subsidiaries issued
in exchange for, or the net proceeds of which are used to extend, refinance,
renew, replace, defease or refund other Indebtedness of the Company or any of
its Restricted Subsidiaries; provided that: (i) the principal amount (or
accreted value, if applicable) of such Permitted Refinancing Indebtedness does
not exceed the principal amount of (or accreted value, if applicable), plus
premium and accrued interest on, the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of reasonable expenses
(including defeasance costs) incurred in connection therewith); (ii) such
Permitted Refinancing Indebtedness has a final maturity date the same as or
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness is subordinated in right of payment to,
the Notes on terms at least as favorable to the Holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness
is incurred either by (a) the Restricted Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
or (b) the Company.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof.
"RCVP" means Rainbow Casino-Vicksburg Partnership, L.P., a Mississippi
limited partnership.
"Refinancing" means collectively (i) the Company's cash tender offer to
purchase any and all of the Company's 12 7/8% Senior Secured Notes due 2003,
plus accrued interest to the date of purchase, (ii) the redemption at
liquidation value of all of the Company's Series B Preferred Stock plus an
amount equal to accrued dividends thereon, (iii) the purchase from HFS Gaming
Corporation of the right to receive royalty payments based on revenues of the
Rainbow Casino and the purchaser of related debt owed to National Gaming
Mississippi, Inc., (iv) the repayment of certain existing lines of credit and
other indebtedness, (v) the offer and sale of the Notes, (vi) entering into the
New Credit Facility and (vii) the payment of related transaction fees and
expenses.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of August 8, 1997, by and among the Company and the other parties named
on the signature pages thereof, as such agreement may be amended, modified or
supplemented from time to time.
"Representative" means any trustee, agent or representative for any
issue of Senior Debt; provided, however, that if and for so long as any Senior
Debt lacks such a representative, then the Representative for such Senior Debt
shall at all times be the holders of a majority in outstanding principal amount
of such Senior Debt.
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<PAGE> 14
"Responsible Officer", when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his or her
knowledge of and familiarity with the particular subject.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company or a
Guarantor, as applicable, secured by a Lien.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means, with respect to the Company or any Guarantor (i)
all Indebtedness outstanding under Credit Facilities and all Interest Swap and
Hedging Obligations, (ii) any other Indebtedness permitted to be incurred by the
Company or such Guarantor, as the case may be, under the terms of this
Indenture, unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in right of
payment to the Notes (in the case of Senior Debt of the Company) or the relevant
Guarantee (in the case of Senior Debt of such Guarantor), and (iii) all
Obligations with respect to the foregoing. Notwithstanding anything to the
contrary in the foregoing, Senior Debt will not include (t) any Indebtedness
described under clause (xii) of Section 4.09, (u) any liability for federal,
state, local or other taxes owed or owing by the Company or such Guarantor, as
the case may be, (v) any Indebtedness of the Company or such Guarantor to any of
their respective Subsidiaries, (w) any trade payables, (x) that portion of any
Indebtedness which at the time of incurrence is incurred in violation of this
Indenture (but as to any such Indebtedness under the New Credit Facility, no
such violation shall be deemed to exist if the Representative of the Lenders
thereunder shall have received an officer's certificate of the Company to the
effect that the issuance of such Indebtedness does not violate this Indenture
and, if incurred pursuant to the first paragraph under the limitation on
incurrence of indebtedness covenant, setting forth in reasonable detail the
reasons therefor), (y) any Indebtedness represented by the Company's 127/8%
Senior Secured Notes due 2003 that remain outstanding after the date of this
Indenture and any Indebtedness represented by any guarantees made by any of the
Company's Subsidiaries in respect thereof, or (z) any Indebtedness of any of the
Company's Subsidiaries existing on the date of this Indenture.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article I, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
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<PAGE> 15
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"SVS" means Southern Video Services, Inc., a Louisiana corporation.
"TIA" means the Trust Indenture Act of 1939, as amended (15 U.S.C.
SectionSection 77aaa-77bbbb), as in effect on the date on which this Indenture
is qualified under the TIA, except as otherwise provided in Section 9.03.
"Transfer Restricted Securities" means securities that bear or are
required to bear the legend set forth in Section 2.06 hereof.
"Trustee" means the party named as such above until a successor replaces
it in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Unrestricted Subsidiary" means any Subsidiary (other than the Key
Subsidiaries or any successor to any of them) that is designated by the Board of
Directors as an Unrestricted Subsidiary pursuant to a Board Resolution, but only
to the extent that such Subsidiary: (i) has no Indebtedness other than
Non-Recourse Debt; (ii) is a Person with respect to which neither the Company
nor any of its Restricted Subsidiaries has any direct or indirect obligation (a)
to subscribe for additional Equity Interests or (b) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; and (iii) has not guaranteed or otherwise directly
or indirectly provided credit support for any Indebtedness of the Company or any
of its Restricted Subsidiaries. Any such designation by the Board of Directors
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions and was permitted by the provisions of Section 4.07. If, at any time,
any Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of this Indenture and any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date
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<PAGE> 16
(and, if such Indebtedness is not permitted to be incurred as of such date under
the provisions of Section 4.09, the Company shall be in default of such
covenant).
"VDS" means Video Distributing Services, Inc., a Louisiana corporation.
"VSI" means Video Services, Inc., a Louisiana corporation.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares or shares
held by foreign nationals in each case to the extent required by applicable law)
shall at the time be owned by such Person or by one or more Wholly Owned
Restricted Subsidiaries of such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Term Defined in Section
-------------------------------- ------------------
<S> <C>
"Affiliate Transaction" 4.11
"Asset Sale Offer" 4.10
"Change of Control Offer" 4.15
"Change of Control Payment" 4.15
"Change of Control Payment Date" 4.15
"Covenant Defeasance" 8.03
"DTC" 2.03
"Event of Default" 6.01
"Excess Proceeds" 4.10
"incur" 4.09
"Legal Defeasance" 8.02
"Offer Amount" 3.09
"Offer Period" 3.09
"Paying Agent" 2.03
"Payment Blockage Notice" 10.03
"Permitted Debt" 4.09
"Purchase Date" 3.09
</TABLE>
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<PAGE> 17
<TABLE>
<S> <C>
"Registrar" 2.03
"Restricted Payments" 4.07
"Subsidiary Guarantees" 11.01
</TABLE>
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company and any successor obligor upon
the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) provisions apply to successive events and transactions;
and
(6) references to sections of or rules under the Securities
Act shall be deemed to include substitute, replacement of successor sections or
rules adopted by the SEC from time to time.
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<PAGE> 18
ARTICLE II
THE NOTES
SECTION 2.01. FORM AND DATING.
The Notes and the Trustee's certificate of authentication in respect
thereof shall be substantially in the form of Exhibit A hereto. The Notes may
have notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof. The terms and
provisions contained in the Notes shall constitute, and are hereby expressly
made, a part of this Indenture and the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
(a) Global Securities. Notes offered and sold to "qualified
institutional buyers" in reliance on Rule 144A under the Securities Act or to
non-U.S. persons in reliance on Regulation S under the Securities Act, in each
case as provided in a Purchase Agreement relating to the Notes, dated August 4,
1997, between the Company, and Credit Suisse First Boston Corporation as Initial
Purchaser, shall be issued initially in the form of one or more permanent global
Notes in definitive, fully registered form without interest coupons with the
legends set forth in Exhibit A hereto (each, a "Global Note"), which shall be
deposited on behalf of the purchasers of the Notes represented thereby with the
Trustee, at the Corporate Trust Office of the Trustee, as custodian for the
Depository (or with such other custodian as the Depository may direct), and
registered in the name of the Depository or a nominee of the Depository, duly
executed by the Company and authenticated and delivered by the Trustee as
hereinafter provided. The aggregate principal amount of the Global Notes may
from time to time be increased or decreased by adjustments made on the records
of the Trustee and the Depository or its nominee in accordance with instructions
given by the Holder thereof as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a
Global Note or the nominee of such Depository and (b) shall apply only to a
Global Note deposited with or on behalf of the Depository.
The Company shall execute and the Trustee shall, in accordance with this
Section 2.1(b), authenticate and deliver initially one or more Global Notes that
(a) shall be registered in the name of the Depository or the nominee of such
Depository and (b) shall be delivered by the Trustee to the Depository or
pursuant to the Depository's instructions or held by the Trustee as custodian
for the Depository.
Members of or participants in the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depository or by the Trustee as the custodian of the
Depository or under such Global Note, and the Depository may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the absolute
owner of such Global Note for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any
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<PAGE> 19
agent of the Company of the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depository or
impair, as between the Depository and its Agent Members, the operation of
customary practices of such Depository governing the exercise of the rights of a
holder of a beneficial interest in any Global Note.
(c) Certificated Securities. Except as provided in Section 2.06(d),
owners of beneficial interests in Global Notes will not be entitled to receive
physical delivery of Notes in certificated form.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Notes for the Company by manual or facsimile
signature. The Company's seal shall be reproduced on the Notes and may be in
facsimile form.
If an Officer whose signature is on a Note no longer holds that office
at the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers, authenticate Notes for original issue up to the aggregate principal
amount stated in paragraph 4 of the Notes. The aggregate principal amount of
Notes outstanding at any time may not exceed such amount except as provided in
Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate of the Company or any of their respective Subsidiaries.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may be
presented or surrendered for registration of transfer or for exchange
("Registrar") and an office or agency where Notes may be presented for payment
("Paying Agent"). The Registrar shall keep a register of the Notes and of their
transfer and exchange. The Company may appoint one or more co-registrars and one
or more additional paying agents. The term "Registrar" includes any co-registrar
and the term "Paying Agent" includes any additional paying agent. The Company
may change any Paying Agent or Registrar without notice to any Holder. The
Company shall notify the Trustee in writing of the name and address of any Agent
not a party to this Indenture. If the Company fails to appoint or maintain
another entity as Registrar or Paying Agent, the Trustee shall act as such. The
Company or any of its Subsidiaries may act as Paying Agent or Registrar.
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<PAGE> 20
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depository with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent in connection with the Notes and to act as Note Custodian with
respect to the Global Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee and to account for any assets
distributed. The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent
(if other than the Company or a Subsidiary) shall have no further liability for
the money. If the Company, a Guarantor or a Subsidiary acts as Paying Agent, it
shall segregate and hold in a separate trust fund for the benefit of the Holders
or the Trustee all money held by it as Paying Agent. Upon any bankruptcy or
reorganization proceedings relating to the Company, the Trustee shall serve as
Paying Agent for the Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Company shall cause the Registrar to furnish to the
Trustee at least seven Business Days before each interest payment date and at
such other times as the Trustee may request in writing, a list in such form and
as of such date as the Trustee may reasonably require of the names and addresses
of the Holders of Notes and the Company shall otherwise comply with TIA Section
312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Definitive Notes. When Definitive Notes are
presented by a Holder to the Registrar with a request (x) to register the
transfer of the Definitive Notes or (y) to exchange such Definitive Notes for an
equal principal amount of Definitive Notes of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, however, that the
Definitive Notes presented or surrendered for register of transfer or exchange
(i) shall be duly endorsed or accompanied by a written instruction of transfer
in form satisfactory to the Registrar and the Trustee duly executed by such
Holder or by his attorney, duly authorized in writing, and (ii) in the case of a
Definitive Note that is a Transfer Restricted Security, such request shall be
accompanied by the following additional information and documents, as
applicable: (A) if such Transfer Restricted Security is being delivered to the
Registrar by a Holder for registration in the name of such Holder without
transfer, a certification to that effect
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<PAGE> 21
from such Holder (in substantially the form of Exhibit B hereto); or (B) if such
Transfer Restricted Security is being transferred to a "qualified institutional
buyer" in accordance with Rule 144A under the Securities Act, outside the United
States to a non-U.S. person in a transaction meeting the requirements of Rule
904 under the Securities Act, pursuant to an exemption from registration in
accordance with Rule 144 under the Securities Act or pursuant to an effective
registration statement under the Securities Act, a certification to that effect
from such Holder (in substantially the form of Exhibit B hereto); or (C) if such
Transfer Restricted Security is being transferred in reliance on another
exemption from the registration requirements of the Securities Act, a
certification to that effect from such Holder (in substantially the form hereto)
and an Opinion of Counsel from such Holder or the transferee and other evidence
reasonable satisfactory reasonably acceptable to the Company, the Trustee and to
the Registrar to the effect that such transfer is in compliance with the
Securities Act.
(b) Transfer of a Definitive Note for a Beneficial Interest in a
Global Note. A Definitive Note may not be exchanged for a beneficial interest in
a Global Note except upon satisfaction of the requirements set forth below. Upon
receipt by the Registrar of a Definitive Note, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the Registrar,
together with (i) if such Definitive Note is a Transfer Restricted Security, a
certification from the Holder thereof (in substantially the form of Exhibit B
hereto) to the effect that such Definitive Note is being transferred by such
Holder to a "qualified institutional buyer" in accordance with Rule 144A under
the Securities Act or, outside the United States to a non-U.S. person in a
transaction meeting the requirements of Rule 904 under the Securities Act; and
(ii) whether or not such Definitive Note is a Transfer Restricted Security,
written instructions from the Holder thereof directing the Registrar to make, or
to direct the Note Custodian to make, an endorsement on the Global Note to
reflect an increase in the aggregate principal amount of the Notes represented
by the Global Note, the Registrar shall cancel such Definitive Note in
accordance with Section 2.11 hereof and cause, or direct the Note Custodian to
cause, in accordance with the standing instructions and procedures existing
between the Depository and the Note Custodian, the aggregate principal amount of
Notes represented by the Global Note to be increased accordingly, provided,
however, that such Definitive Note shall not be cancelled if the Global Notes
have been previously exchanged for Definitive Notes. If no Global Notes are then
outstanding, the Company shall issue and the Trustee, upon receipt of an
authentication order in the form of an Officers' Certificate, shall authenticate
and deliver a new Global Note in the appropriate principal amount.
(c) Transfer and Exchange of Global Notes. The transfer and exchange
of Global Notes or beneficial interests therein shall be effected through the
Depository, in accordance with this Indenture and the procedures of the
Depository therefor, which shall include restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act. A
transferor of a beneficial interest in a Global Note shall deliver to the
Registrar a written order given in accordance with the Depository's procedures
containing information regarding the participant account of the Depository to be
credited with a beneficial interest in the Global Note. The Registrar shall, in
accordance with such instructions, instruct the Depository to credit to the
account of the Person specified in such instructions a beneficial interest in
the Global Note and to debit the account of the Person making the transfer the
beneficial interest in the Global Note being transferred.
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<PAGE> 22
(d) Transfer of a Beneficial Interest in a Global Note for a
Definitive Note.
(i) A Global Note deposited with the Depository or with the
Trustee as custodian for the Depository pursuant to Section 2.1 shall be
transferred to the beneficial owners thereof in the form of Definitive Notes in
an aggregate principal amount equal to the principal amount of such Global Note,
in exchange for such Global Note, only if such transfer complies with the
following paragraph (ii), and (A) the Depository notifies the Company that it is
unwilling or unable to continue as Depository for such Global Security or if at
any time such Depository ceases to be a "clearing agency" registered under the
Exchange Act and a successor depository is not appointed by the Company within
90 days of such notice, or (B) an Event of Default has occurred and is
continuing or (C) the Company, in its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of certificated Notes under this
Indenture.
(ii) If permitted under the preceding paragraph (i) and an
owner of a beneficial interest in a Global Note deposited with the Depository or
with the Trustee as custodian for the Depository desires to transfer its
interest in such Global Note to a Person who is required to take delivery
thereof in the form of a Definitive Note, such owner may, subject to the rules
and procedures of Euroclear or Cedel, if applicable, and the Depository, cause
the exchange of such interest for one or more certificated Notes of any
authorized denomination or denominations and of the same aggregate principal
amount at maturity. Upon receipt by the Registrar of written instructions or
such other form of instructions as is customary for the Depository from the
Depository or its nominee on behalf of any Person having a beneficial interest
in a Global Note, and, in the case of a Transfer Restricted Security, the
following additional information and documents (all of which may be submitted by
facsimile): (A) if such beneficial interest is being transferred to the Person
designated by the Depository as being the beneficial owner, a certification to
that effect from such Person (in substantially the form of Exhibit B hereto); or
(B) if such beneficial interest is being transferred to a "qualified
institutional buyer" in accordance with Rule 144A under the Securities Act,
outside the United States to a non-U.S. person in a transaction meeting the
requirements of Rule 904 under the Securities Act, pursuant to an exemption from
registration in accordance with Rule 144 under the Securities Act or pursuant to
an effective registration statement under the Securities Act, a certification to
that effect from the transferor (in substantially the form of Exhibit B hereto);
or (C) if such beneficial interest is being transferred in reliance on another
exemption from the registration requirements of the Securities Act, a
certification to that effect from the transferor (in substantially the form of
Exhibit B hereto) and an Opinion of Counsel from the transferee and other
evidence reasonably satisfactory to the Company and to the Registrar to the
effect that such transfer is in compliance with the Securities Act, the
Registrar or the Note Custodian, at the direction of the Trustee, shall, in
accordance with the standing instructions and procedures existing between the
Depository and the Note Custodian, cause the aggregate principal amount of
Global Notes to be reduced accordingly and, following such reduction, the
Company shall execute and, upon receipt of an authentication order in accordance
with Section 2.02 hereof, the Trustee shall authenticate and deliver to the
transferee a Definitive Note in the appropriate principal amount.
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<PAGE> 23
(iii) Definitive Notes issued in exchange for a beneficial
interest in a Global Note pursuant to this Section 2.06(d) shall be registered
in such names and in such authorized denominations as the Depository, pursuant
to instructions from its direct or indirect participants or otherwise, shall
instruct the Registrar. The Registrar shall deliver such Definitive Notes to the
Persons in whose names such Notes are so registered.
(e) Restrictions on Transfer and Exchange of Global Notes.
Notwithstanding any other provision of this Indenture (other than the provisions
set forth in subsection (f) of this Section 2.06), a Global Note may not be
transferred as a whole except by the Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or another nominee of the
Depository or by the Depository or any such nominee to a successor Depository or
a nominee of such successor Depository.
(f) Authentication of Definitive Notes in Absence of Depository. If
at any time, (i) the Depository for the Notes notifies the Company that the
Depository is unwilling or unable to continue as Depository for the Global Notes
and a successor Depository for the Global Notes is not appointed by the Company
within 90 days after delivery of such notice; or (ii) the Company, at its sole
discretion, notifies the Trustee in writing that it elects to cause the issuance
of Definitive Notes under this Indenture, then the Company shall execute, and
the Trustee shall, upon receipt of an authentication order in accordance with
Section 2.02 hereof, authenticate and deliver, Definitive Notes in an aggregate
principal amount equal to the principal amount of the Global Notes in exchange
for such Global Notes.
(g) Legend.
(i) Except as permitted by the following paragraphs (ii) and
(iii), each Note certificate evidencing Global Notes and Definitive Notes (and
all Notes issued in exchange therefor or substitution thereof) shall bear a
legend in substantially the following form:
"THE SECURITY EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY
NOT BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1) (a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c)
OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE
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<PAGE> 24
904 UNDER THE SECURITIES ACT, OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION
OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER OF THE NOTE EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented by a Global
Note) pursuant to Rule 144 under the Securities Act or pursuant to an effective
registration statement under the Securities Act, (A) in the case of any Transfer
Restricted Security that is a Definitive Note, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted Security for a Definitive
Note that does not bear the legend set forth in (i) above and rescind any
restriction on the transfer of such Transfer Restricted Security; and (B) in the
case of any Transfer Restricted Security represented by a Global Note, such
Transfer Restricted Security shall not be required to bear the legend set forth
in (i) above, but shall continue to be subject to the provisions of Section
2.06(c) hereof; provided, however, that with respect to any request for an
exchange of a Transfer Restricted Security that is represented by a Global Note
for a Definitive Note that does not bear the legend set forth in (i) above,
which request is made in reliance upon Rule 144, the Holder thereof shall
certify in writing to the Registrar that such request is being made pursuant to
Rule 144 (such certification to be substantially in the form of Exhibit B
hereto).
(iii) Notwithstanding the foregoing, upon consummation of the
Exchange Offer, the Company shall issue and, upon receipt of an authentication
order in accordance with Section 2.02 hereof, the Trustee shall authenticate
Series B Notes in exchange for Series A Notes accepted for exchange in the
Exchange Offer, which Series B Notes shall not bear the legend set forth in (i)
above, and the Registrar shall rescind any restriction on the transfer of such
Notes, in each case unless the Holder of such Series A Notes is either (A) a
broker-dealer, (B) a Person participating in the distribution of the Series A
Notes or (C) a Person who is an affiliate (as defined in Rule 144A) of the
Company.
(h) Cancellation and/or Adjustment of Global Notes. At such time as
all beneficial interests in Global Notes have been exchanged for Definitive
Notes, redeemed, repurchased or cancelled, all Global Notes shall be returned to
or retained and cancelled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for Definitive Notes, redeemed, repurchased or cancelled, the
principal amount of Notes represented by such Global Note shall be reduced
accordingly and an endorsement shall be made on such Global Note, by the Trustee
or the Notes Custodian, at the direction of the Trustee, to reflect such
reduction.
(i) General Provisions Relating to Transfers and Exchanges.
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<PAGE> 25
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Definitive Notes and
Global Notes at the Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any transfer tax or similar governmental charge payable
in connection therewith (other than any such transfer taxes or similar
governmental charge payable upon exchange or transfer pursuant to Sections 3.07,
4.10, 4.15 and 9.05 hereto).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in part.
(iv) All Definitive Notes and Global Notes issued upon any
registration of transfer or exchange of Definitive Notes or Global Notes shall
be the valid obligations of the Company, evidencing the same debt, and entitled
to the same benefits under this Indenture, as the Definitive Notes or Global
Notes surrendered upon such registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to
register the transfer of or to exchange Notes during a period beginning at the
opening of business 15 days before the day of any selection of Notes for
redemption under Section 3.02 hereof and ending at the close of business on the
day of selection; (B) to register the transfer of or to exchange any Note so
selected for redemption in whole or in part, except the unredeemed portion of
any Note being redeemed in part; or (C) to register the transfer of or to
exchange a Note between a record date and the next succeeding interest payment
date.
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the Company may deem and treat
the Person in whose name any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of principal of and interest on such
Notes, and neither the Trustee, any Agent nor the Company shall be affected by
notice to the contrary.
(vii) The Trustee shall authenticate Definitive Notes and
Global Notes in accordance with the provisions of Section 2.02 hereof.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or the Company and
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, in the absence of notice to the Company and the Trustee that
such Note has been acquired by a bona-fide purchaser, the Company shall issue
and the Trustee, upon the written order of the Company signed by two Officers of
the Company, shall authenticate and deliver a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the
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<PAGE> 26
Company to protect the Company, the Trustee, any Agent and any authenticating
agent from any loss that any of them may suffer if a Note is replaced. The
Company may charge for its expenses (including the fees and expenses of the
Trustee) in replacing a Note.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Note is held by a bona fide purchaser, in which case the
replacement Note shall cease to be outstanding, subject to the provisions of
Section 8-405 of the Uniform Commercial Code.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that the Trustee knows are so owned shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate and deliver temporary Notes upon a written
order of the Company signed by two Officers of the Company. Temporary Notes
shall be substantially in the form of definitive Notes but may have variations
that the Company and the Trustee consider appropriate. Without
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<PAGE> 27
unreasonable delay, the Company shall prepare and the Trustee shall authenticate
definitive Notes in exchange for temporary Notes.
Until so exchanged, the temporary Notes shall in all respects be
entitled to the same rights, privileges and benefits under this Indenture as
permanent Notes authenticated and delivered hereunder.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee shall cancel and destroy all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be delivered
to the Company. Subject to Section 2.07, the Company may not issue new Notes to
replace Notes that it has paid or that have been delivered to the Trustee for
cancellation. No Notes shall be authenticated in lieu of or in exchange for any
Notes cancelled as provided in this Section 2.11, except as expressly permitted
in the form of Notes and as permitted by this Indenture.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it shall
pay the defaulted interest in any lawful manner plus, to the extent lawful,
interest payable on the defaulted interest, to the Persons who are Holders on
a subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Company shall notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Company shall fix or cause to be fixed each such
special record date and payment date, provided that each such special record
date shall not be more than 15 days nor less than 10 days prior to the related
payment date for such defaulted interest, whether or not such day is a Business
Day, and if the Company does not promptly fix any special record date, the
Trustee may fix such date. At least 10 days before the special record date, the
Company (or, upon the written request of the Company, the Trustee in the name
and at the expense of the Company) shall mail or cause to be mailed to each
Holder a notice that states the special record date, the related payment date
and the amount of such defaulted interest to be paid.
ARTICLE III
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this
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<PAGE> 28
Indenture pursuant to which the redemption shall occur, (ii) the redemption
date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption
price. Any such notice to the Trustee may be cancelled at any time up to one
Business Day prior to notice of such redemption being mailed to any Holder and
shall thereby be void and of no effect.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any time, the
Trustee shall select the Notes to be redeemed among the Holders of the Notes in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not so listed, on a
pro rata basis, by lot or in accordance with any other method the Trustee
considers fair and appropriate. In the event of partial redemption by lot, the
particular Notes to be redeemed shall be selected, unless otherwise provided
herein, not less than 30 nor more than 60 days prior to the redemption date by
the Trustee from the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company, the Registrar and the
Paying Agent, if applicable, in writing of the Notes selected for redemption
and, in the case of any Note selected for partial redemption, the principal
amount thereof to be redeemed. Notes and portions of Notes selected shall be in
amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes
of a Holder are to be redeemed, the entire outstanding amount of Notes held by
such Holder, even if not a multiple of $1,000, shall be redeemed. Except as
provided in the preceding sentence, provisions of this Indenture that apply to
Notes called for redemption also apply to portions of Notes called for
redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09 hereof, at least 30 days but
not more than 60 days before a redemption date, the Company shall mail or cause
to be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address. The notice shall identify
the Notes to be redeemed and shall state (a) the redemption date; (b) the
redemption price; (c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption date
upon surrender of such Note, a new Note or Notes in principal amount equal to
the unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent; (e) that Notes called for
redemption must be surrendered to the Paying Agent to collect the redemption
price; (f) that, unless the Company defaults in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date; (g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and (h)
the CUSIP number of the Notes to be redeemed and that no representation is made
as to the correctness or accuracy of the CUSIP number, if any, listed in such
notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting
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that the Trustee give such notice and setting forth the information to be stated
in such notice as provided in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
At least one Business Day prior to the redemption date, the Company
shall deposit with the Trustee or with the Paying Agent (other than the Company
or any Affiliate of the Company) money in immediately available funds sufficient
to pay the redemption price of and accrued interest on all Notes to be redeemed
on that date. The Trustee or the Paying Agent shall promptly return to the
Company any money deposited with the Trustee or the Paying Agent by the Company
in excess of the amounts necessary to pay the redemption price of, and accrued
interest on, all Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph,
on and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such record date. If any
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Company to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the redemption date until
such principal is paid, and to the extent lawful on any interest not paid on
such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
and deliver to the Holder at the expense of the Company a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
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<PAGE> 30
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as set forth in clauses (b) and (c) of this Section 3.07,
the Company shall not have the option to redeem the Notes pursuant to this
Section 3.07 prior to August 1, 2002. Thereafter, the Company shall have the
option to redeem the Notes, in whole or in part, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the applicable
redemption date, if redeemed during the twelve-month period beginning on August
1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002 105.000%
2003 103.333%
2004 101.667%
2005 and thereafter 100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this Section
3.07, at any time prior to August 9, 2000, the Company may redeem up to an
aggregate of 33 1/3% of the original aggregate principal amount of the Notes at
a redemption price of 110% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the redemption date,
with the net cash proceeds of one or more Equity Offerings; provided that in
each case, at least 66 2/3% of the original aggregate principal amount of the
Notes remain outstanding immediately after the occurrence of such redemption;
and provided, further, that such redemption shall occur within 45 days of the
date of the closing of each such Equity Offering.
(c) Notwithstanding any other provisions hereof, if any Gaming
Authority requires that a Holder or beneficial owner of Notes must be licensed,
qualified or found suitable under any applicable gaming law and such Holder or
beneficial owner fails to apply for a license, qualification or a finding of
suitability within 30 days after being requested to do so by the Gaming
Authority (or such lesser period that may be required by such Gaming Authority),
or if such Holder or such beneficial owner is not so licensed, qualified or
found suitable, the Company will have the right, at its option, (i) to require
such Holder or beneficial owner to dispose of such Holder's or beneficial
owner's Notes within 30 days of receipt of such notice of such finding by the
applicable Gaming Authority or such earlier date as may be ordered by such
Gaming Authority or (ii) to redeem the Notes of such Holder or beneficial owner
at the lesser of (a) the price at which such Holder or beneficial owner acquired
such Notes, without accrued interest or Liquidated Damages, if any, unless the
payment of such interest or Liquidated Damages, if any, is permitted by the
applicable Gaming Authority, in which case such interest and Liquidated Damages,
if any, shall be paid through
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the date of redemption, (b) the fair market value of such Notes on such
redemption date and (c) the principal amount of such Notes without accrued
interest or Liquidated Damages, if any, thereon, unless the payment of such
interest or Liquidated Damages, if any, is permitted by the applicable Gaming
Authority, in which case such interest and Liquidated Damages, if any, shall be
paid through the date of redemption. The Holder or beneficial owner of Notes
applying for a license, qualification or a finding of suitability must pay all
costs of the licensure or investigation for such qualification or finding of
suitability. The Company is not required to pay or reimburse any Holder or
beneficial owner of Notes who is required to apply for such license,
qualification or finding of suitability for the costs of the licensure or
investigation for such qualification or finding of suitability.
(d) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
Except as set forth under Sections 4.10 and 4.15 hereof, the Company
shall not be required to make mandatory redemption payments with respect to the
Notes.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
(a) In the event that, pursuant to Section 4.10 hereof, the Company
shall be required to commence an Asset Sale Offer, it shall follow the
procedures specified below. The Asset Sale Offer shall remain open for a period
of 20 Business Days following its commencement and no longer, except to the
extent that a longer period is required by applicable law (the "Offer Period").
No later than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount")
or, if less than the Offer Amount has been tendered, all Notes validly tendered
in response to the Asset Sale Offer. Payment for any Notes so purchased shall be
made in the same manner as interest payments are made. If the Purchase Date is
on or after an interest record date and on or before the related interest
payment date, any accrued and unpaid interest shall be paid to the Person in
whose name a Note is registered at the close of business on such record date,
and no additional interest shall be payable to Holders who tender Notes pursuant
to the Asset Sale Offer.
(b) Upon the commencement of an Asset Sale Offer, the Company shall
send, by first class mail, a notice to the Trustee and each of the Holders, with
a copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state (i) that the Asset
Sale Offer is being made pursuant to this Section 3.09 and Section 4.10 hereof
and the length of time the Asset Sale Offer shall remain open; (ii) the Offer
Amount, the purchase price and the Purchase Date; (iii) that any Note not
tendered or accepted for payment shall continue to accrue interest; (iv) that,
unless the Company defaults in making such payment, any Note accepted for
payment pursuant to the Asset Sale Offer shall cease to accrete or accrue
interest after the Purchase Date; (v) that Holders electing to have a Note
purchased pursuant to an Asset Sale Offer may elect only to have all of such
Note purchased and may not elect to have only a portion of such Note purchased;
(vi) that Holders electing to have a Note purchased pursuant to any Asset Sale
Offer shall be required to surrender the Note, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Note completed, or
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<PAGE> 32
transfer by book-entry transfer, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date; (vii) that Holders shall be entitled to
withdraw their election if the Company, the depositary or the Paying Agent, as
the case may be, receives, not later than the expiration of the Offer Period, a
telegram, telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Note the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such Note
purchased; (viii) that, if the aggregate principal amount of Notes surrendered
by Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and (ix) that Holders whose
Notes were purchased only in part shall be issued new Notes equal in principal
amount to the unpurchased portion of the Notes surrendered (or transferred by
book-entry transfer).
(c) On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Notes tendered,
and shall deliver to the Trustee an Officers' Certificate stating that such
Notes or portions thereof were accepted for payment by the Company in accordance
with the terms of this Section 3.09. The Company, the Depository or the Paying
Agent, as the case may be, shall promptly (but in any case not later than five
days after the Purchase Date) deliver to each tendering Holder an amount equal
to the purchase price of the Notes tendered by such Holder and accepted by the
Company for purchase, and the Company shall promptly issue a new Note, and the
Trustee, upon written order pursuant to an Officers' Certificate from the
Company shall authenticate and deliver such new Note to such Holder, in a
principal amount equal to any unpurchased portion of the Note surrendered. Any
Note not so accepted shall be promptly mailed or delivered by the Company to the
Holder thereof. The Company shall publicly announce the results of the Asset
Sale Offer on the Purchase Date.
(d) Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof.
ARTICLE IV
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 12:00 p.m. New York City time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Company shall pay all
Liquidated Damages, if any, in the same manner on the dates and in the amounts
set forth in the Registration Rights Agreement.
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<PAGE> 33
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee
as one such office or agency of the Company in accordance with Section 2.03.
SECTION 4.03. REPORTS.
Whether or not required by the rules and regulations of the SEC, so long
as any Notes are outstanding, the Company shall furnish to the Holders of Notes,
within 15 days after the Company is or would have been required to file each of
the following with the SEC, (i) all quarterly and annual financial information
that would be required to be contained in a filing with the SEC on Forms 10-Q
and 10-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" that describes the financial condition and results of operations of
the Company and its consolidated Subsidiaries (showing in reasonable detail on
the face of the financial statements, in the footnotes thereto or in
Management's Discussion and Analysis of Financial Condition and Results of
Operations the financial condition and results of operations of the Company and
its Restricted Subsidiaries separate from the financial condition and results of
operations of the Unrestricted Subsidiaries of the Company) and, with respect to
the annual information only, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required to
be filed with the SEC on Form 8-K if the
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Company were required to file such reports. In addition, whether or not required
by the rules and regulations of the SEC, the Company shall file a copy of all
such information and reports with the SEC for public availability (unless the
SEC will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, for so
long as any Notes remain outstanding, the Company and the Guarantors shall
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act. Notwithstanding anything to the contrary
herein, the Trustee shall have no duty to review such documents for purposes of
determining compliance with any provisions of the Indenture.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 90 days after
the end of each fiscal year, an Officers' Certificate complying with Section
314(a)(4) of the TIA and stating that a review of the activities of the Company
and its Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under this
Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge the Company and its
Subsidiaries have kept, observed, performed and fulfilled each and every
covenant contained in this Indenture and are not in default in the performance
or observance of any of the terms, provisions and conditions of this Indenture
(or, if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which he or she may have knowledge and what
action the Company and/or its Subsidiaries is taking or proposes to take with
respect thereto) and that to the best of his or her knowledge no event has
occurred and remains in existence by reason of which payments on account of the
principal of or interest, if any, on the Notes is prohibited or if such event
has occurred, a description of the event and what action the Company and/or its
Subsidiaries is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article IV or Article V hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto. The Trustee shall not be deemed to have knowledge of any
Default or Event of Default unless one of its Responsible Officers receives
written notice thereof from the Company or any of the Holders.
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(d) The Issuer shall, within 30 days of the date of this Indenture,
deliver to the Trustee an Officer's Certificate listing all entities
constituting Gaming Authorities as of such date, and shall further deliver to
the Trustee, for so long as any of the Notes are outstanding, written notice of
any changes from or additions to such list within 15 Business Days of becoming
aware of any such change or addition.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment would not have a material adverse
effect on the Company and its Subsidiaries taken as a whole.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company and each of the Guarantors covenants (to the extent that it
may lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company and
each Guarantor (to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law, and covenants that it shall
not, by resort to any such law, hinder, delay or impede the execution of any
power herein granted to the Trustee, but shall suffer and permit the execution
of every such power as though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries, directly or indirectly, to: (i) declare or pay any dividend or
make any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation) or to the direct or
indirect holders of the Company's or any of its Restricted Subsidiaries' Equity
Interests in their capacity as such (other than dividends or distributions
payable in Equity Interests (other than Disqualified Stock) of the Company and
dividends and distributions payable solely to the Company or to a Restricted
Subsidiary); (ii) purchase, redeem or otherwise acquire or retire for value
(including without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company; (iii) make any payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Notes, except a payment of interest or
principal at Stated Maturity; or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments"); unless, at the time of and
after giving effect to such Restricted Payment:
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(A) no Default or Event of Default shall have
occurred and be continuing or would occur as a consequence thereof;
(B) the Company would, at the time of such
Restricted Payment and after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of the applicable four-quarter
period, have been permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Consolidated Coverage Ratio test set forth in Section 4.09; and
(C) such Restricted Payment, together with the
aggregate amount of all other Restricted Payments made by the Company and its
Restricted Subsidiaries after the date of this Indenture (excluding Restricted
Payments permitted by clauses (ii), (iii) and (viii) of the next succeeding
paragraph and excluding 50% of Restricted Payments made to holders of Equity
Interests not held by the Company or any of its Restricted Subsidiaries to the
extent permitted by clause (iv) of the next succeeding paragraph), is less than
the sum of (i) 50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the date of this Indenture to the end of
the Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), plus (ii) 100% of the aggregate net cash proceeds, or the GAAP
purchase accounting valuation of assets or property (determined on the date of
issuance or conversion), received by the Company from the issue or sale since
the date of this Indenture of Equity Interests of the Company (other than
Disqualified Stock) or of Disqualified Stock or debt securities of the Company
that have been converted into or exchanged for such Equity Interests (other than
Equity Interests, Disqualified Stock or convertible debt securities sold to a
Subsidiary of the Company and other than Disqualified Stock or convertible debt
securities that have been converted into Disqualified Stock), plus (iii) the
amount by which Indebtedness or Disqualified Stock of the Company is reduced on
the Company's balance sheet upon the conversion or exchange (other than by a
Restricted Subsidiary of the Company) subsequent to the date of this Indenture
of any Indebtedness or Disqualified Stock of the Company convertible or
exchangeable for Capital Stock of the Company (less the amount of any cash, or
other property, distributed by the Company upon such conversion or exchange),
plus (iv) the amount equal to the net reduction in Investments (other than
Permitted Investments) made by the Company or any of its Restricted Subsidiaries
in any Person resulting from (a) dividends or distributions on or repurchases or
redemptions of such Investments by such Person, proceeds realized upon the sale
of such Investment to an unaffiliated purchaser, reductions in amounts
guaranteed, and repayments of loans or advances or other transfers of assets by
such Person to the Company or any Restricted Subsidiary of the Company or (b)
the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries
(valued as provided in the second succeeding paragraph); provided, however, that
no amount shall be included under this clause (iv) to the extent it is already
included in Consolidated Net Income.
The foregoing provisions will not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof if, at said date
of declaration, such payment would have complied with the provisions of this
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any Indebtedness that is subordinated to the Notes or Equity
Interests of the Company out of the Net Cash Proceeds of the substantially
concurrent sale
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(other than to a Subsidiary of the Company) of other Equity Interests of the
Company (other than any Disqualified Stock) issued after the date of this
Indenture or any exchange of Equity Interests of the Company (other than
Disqualified Stock) issued after the date of this Indenture for any Indebtedness
that is subordinated to the Notes or Equity Interests of the Company; provided
that the amount of any such Net Cash Proceeds that are utilized for any such
redemption, repurchase, retirement, defeasance or other acquisition shall be
excluded from clause (c) (ii) of the preceding paragraph; (iii) the defeasance,
redemption, repurchase or other acquisition of Indebtedness that is subordinated
to the Notes with the Net Cash Proceeds from an incurrence of or exchange for
Permitted Refinancing Indebtedness; (iv) the payment of any dividend or
distribution on account of Equity Interests by a Restricted Subsidiary of the
Company to the holders of its respective Equity Interests on a pro rata basis;
(v) the repurchase, redemption or other acquisition or retirement for value of
any Equity Interests of the Company or any Subsidiary of the Company held by
employees of the Company (or any of its Subsidiaries) pursuant to any stock
ownership or option plan in effect from time to time; provided that the
aggregate price paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed $1.0 million in any twelve-month period; (vi)
loans and advances to officers and directors of the Company or any of its
Restricted Subsidiaries made in the ordinary course of business the aggregate of
which shall not exceed $1.5 million outstanding at any time; (vii) the
redemption by the Company or any Restricted Subsidiary of any subordinated debt
or Equity Interest if (A) counsel to the Company delivers an opinion that
failure to so redeem would subject the Company to a materially adverse action by
a Gaming Authority (or, if applicable, a failure so to act with a materially
adverse consequence to the Company) or is required to preserve a Gaming License
and (B) the Company determines (as evidenced by a resolution of the Board of
Directors of the Company delivered to the Trustee) that such adverse action or
failure so to act would be likely to have a material adverse effect on the
Company; (viii) the redemption of all outstanding shares of the Company's 15%
Non-Voting Senior Pay-In-Kind Special Stock, Series B, within 60 days following
the date of this Indenture; and (ix) payments that would otherwise be Restricted
Payments in an aggregate amount not to exceed $7.5 million.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries in the Subsidiary so designated will be
deemed to be Restricted Payments at the time of such designation and will reduce
the amount available for Restricted Payments under the first paragraph of this
covenant. All such outstanding Investments will be deemed to constitute
Investments in an amount equal to the fair market value of such Investments at
the time of such designation. Such designation will be permitted only if such
Restricted Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. Upon a
redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the
Company shall be deemed to continue to have a permanent "Investment" in an
Unrestricted Subsidiary in an amount (if positive) equal to (x) the Company's
"Investment" in such Unrestricted Subsidiary at the time of such redesignation
less (y) the portion (proportionate to the Company's equity interest in such
Unrestricted Subsidiary) of the fair market value of the net assets of such
Unrestricted Subsidiary at the time that such Subsidiary is so redesignated a
Restricted Subsidiary.
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The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any non-cash Restricted Payment shall be determined by
the Board of Directors whose resolution with respect thereto shall be delivered
to the Trustee. Not later than ten business days following the end of each
fiscal quarter, the Company shall deliver to the Trustee an Officers'
Certificate identifying each Restricted Payment made by the Company during such
fiscal quarter and stating that each such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by this Section
4.07 were computed.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction on the
ability of any Subsidiary to (i)(a) pay dividends or make any other
distributions to the Company or any of its Restricted Subsidiaries (1) on its
Capital Stock or (2) with respect to any other interest or participation in, or
measured by, its profits, or (b) pay any indebtedness owed to the Company or any
of its Restricted Subsidiaries, (ii) make loans or advances to the Company or
any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) the New Credit
Facility as in effect on the date of this Indenture and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that the dividend and other
payment restrictions contained therein are no more restrictive than those
contained in the New Credit Facility as in effect on the date of this Indenture,
(b) any agreement in effect at or entered into on the date of this Indenture,
(c) this Indenture and the Notes, (d) any instrument or agreement of a Person
acquired by the Company or any of its Restricted Subsidiaries as in effect at
the time of such acquisition (except to the extent such instrument or agreement
was entered into in connection with or in contemplation of such acquisition),
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property or
assets of the Person, so acquired, provided that, in the case of Indebtedness,
such Indebtedness was permitted by the terms of this Indenture to be incurred,
(e) by reason of customary non-assignment provisions in leases entered into in
the ordinary course of business and consistent with past practices, (f) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, (g) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive than those contained in the agreements
governing the Indebtedness being refinanced, (h) restrictions contained in
security agreements or mortgages to the extent such restrictions restrict the
transfer of the property or assets subject to such security agreements or
mortgages, (i) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all of the capital stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition, (j) any restriction in any
agreement that is not more restrictive than the restrictions under the terms of
the New Credit
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Facility as in effect on the date of this Indenture and (k) in the case of
clause (iii) above, encumbrances and restrictions in the ordinary course of
business that do not individually or in the aggregate detract from the value of
property or assets of the Company or a Restricted Subsidiary in a material
manner.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and that the Company and the Guarantors shall not issue any Disqualified
Stock and the Company shall not permit any of its Restricted Subsidiaries which
are not Guarantors to issue any shares of preferred stock; provided, however,
that the Company and any Guarantor may incur Indebtedness (including Acquired
Debt and Indebtedness under the New Credit Facility) or issue shares of
Disqualified Stock if the Consolidated Coverage Ratio for the Company's most
recently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have been at
least 2.0 to 1, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred, or the Disqualified Stock had been issued, as the case may
be, and such net proceeds been applied, at the beginning of such four-quarter
period.
The provisions of the first paragraph of this Section 4.09 will not
apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(i) the incurrence by the Company or any of its Restricted
Subsidiaries of term Indebtedness under the New Credit Facility; provided that
the aggregate principal amount of all term Indebtedness outstanding under the
New Credit Facility after giving effect to each such incurrence does not exceed
an amount equal to $115.0 million plus an additional $25.0 million of deferred
term Indebtedness which shall be utilized to effect the Rainbow Royalty Buyout
and to repurchase the Rainbow Note Payable, less the aggregate amount of all
principal repayments actually made from time to time after the date of this
Indenture with respect to such Indebtedness (other than principal payments made
from any permitted refinancings thereof);
(ii) the incurrence by the Company or any of its Restricted
Subsidiaries of revolving credit Indebtedness (inclusive of letters of credit,
which shall be deemed to have a principal amount equal to the maximum potential
liability of the Company and its Restricted Subsidiaries thereunder) under the
New Credit Facility; provided that the aggregate principal amount of all
revolving credit Indebtedness outstanding under the New Credit Facility after
giving effect to such incurrence, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any other Indebtedness
incurred pursuant to this clause (ii), does not exceed the greater of (x) $90.0
million and (y) the sum of (A) 75% of the book value of the accounts receivable
of the Company and its Restricted Subsidiaries and (B) 40% of the book value of
the inventory of the Company and its Restricted Subsidiaries;
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(iii) the incurrence by the Company and its Restricted
Subsidiaries of the Existing Indebtedness;
(iv) the incurrence by the Company and the Guarantors of
Indebtedness represented by the Notes;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the purpose
of financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of the Company
or such Restricted Subsidiary; provided that the aggregate principal amount of
such Indebtedness that is not Non-Recourse Debt (except as to the property,
plant or equipment being financed) does not exceed $20.0 million at any time
outstanding (including any Permitted Refinancing Indebtedness relating thereto);
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net
proceeds of which are used to refund, refinance or replace Indebtedness or
Disqualified Stock that was permitted by this Indenture to be incurred (other
than pursuant to clause (i) or (ii) of this paragraph);
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and any
of its Restricted Subsidiaries; provided, however, that (A) if the Company is
the obligor on such Indebtedness and the payee is not a Guarantor, such
Indebtedness is expressly subordinated to the prior payment in full in cash of
all Obligations with respect to the Notes and (B)(1) any subsequent issuance or
transfer of Equity Interests that results in any such Indebtedness being held by
a Person other than the Company or a Restricted Subsidiary or (2) any sale or
other transfer of any such Indebtedness to a Person that is not either the
Company or a Restricted Subsidiary shall be deemed, in each case, to constitute
an incurrence of such Indebtedness by the Company or such Restricted Subsidiary,
as the case may be;
(viii) the incurrence by the Company of Interest Swap and
Hedging Obligations;
(ix) the incurrence by the Company or any of its Restricted
Subsidiaries of (A) Indebtedness in respect of performance, completion,
guarantee, surety or similar bonds provided by the Company or any Restricted
Subsidiary in the ordinary course of business, or (B) Indebtedness in respect of
any bond or surety obligation in order to prevent the loss or material
impairment of or to obtain a Gaming License or as otherwise required by an order
of any Gaming Authority to the extent required by applicable law and consistent
in character and amount with customary industry practice;
(x) the incurrence by the Company or any of its Restricted
Subsidiaries of reimbursement obligations with respect to letters of credit in
respect of workers' compensation claims consistent in character and amount with
customary industry practice;
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(xi) the guarantee by the Company or any of its Restricted
Subsidiaries of Indebtedness of the Company or a Restricted Subsidiary of the
Company that was permitted to be incurred by another provision of this covenant;
(xii) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by liabilities for jackpots payable for
progressive games in a manner consistent with industry practice;
(xiii) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness (which may, but need not, be incurred
under the New Credit Facility) in an aggregate principal amount (or accreted
value, as applicable) not to exceed $20.0 million at any time outstanding
(including any Permitted Refinancing Indebtedness relating thereto).
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xiii) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant and such item of Indebtedness will be
treated as having been incurred pursuant to only one of such clauses or pursuant
to the first paragraph hereof. Neither the accrual of interest nor the accretion
of accreted value will be deemed to be an incurrence of Indebtedness for
purposes of this covenant. The maximum amount of Indebtedness that the Company
or a Restricted Subsidiary may incur pursuant to this covenant shall not be
deemed to be exceeded with respect to any outstanding Indebtedness due solely to
the result of the fluctuations in the exchange rates of currencies.
SECTION 4.10. ASSET SALES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash or
Cash Equivalents; provided that the amount of (x) any liabilities (as shown on
the Company's or such Restricted Subsidiary's most recent balance sheet) or
Indebtedness of the Company or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the Notes or
any guarantee thereof) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases the Company or such
Restricted Subsidiary from further liability and (y) any securities, notes or
other obligations received by the Company or any such Restricted Subsidiary from
such transferee that are promptly converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received), shall be deemed to be
cash for purposes of this paragraph.
Within 360 days after the receipt of any Net Available Cash from any
Asset Sale, the Company or any Restricted Subsidiary shall apply such Net
Available Cash, at its option, (a)
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to repay Senior Debt (and to correspondingly reduce commitments with respect
thereto in the case of revolving borrowings) of the Company or any Restricted
Subsidiary or, in the case of any Asset Sale involving assets of any Restricted
Subsidiary that is not a Guarantor, to repay any Indebtedness of such Restricted
Subsidiary, or (b) to invest in assets and property (other than notes, bonds,
obligations and securities) which in the good faith judgment of the Board of
Directors of the Company will constitute or be a part of a Gaming Business
immediately following such transaction. Pending the final application of any
such Net Available Cash, the Company may temporarily reduce Senior Debt or
otherwise invest such Net Available Cash in any manner that is not prohibited by
this Indenture. Notwithstanding the foregoing provisions of this paragraph, the
Company and its Restricted Subsidiaries shall not be required to apply any Net
Available Cash in accordance with this paragraph except to the extent that the
aggregate Net Available Cash from all Asset Sales which is not applied in
accordance with this paragraph exceeds $5.0 million. Any Net Available Cash
(other than Net Available Cash not so applied pursuant to the preceding
sentence) from Asset Sales that is not applied or invested as provided in the
first sentence of this paragraph will be deemed to constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company
will be required to make an offer to all Holders of Notes (an "Asset Sale
Offer") to purchase the maximum principal amount of Notes that may be purchased
out of the Excess Proceeds, at an offer price in cash in an amount equal to 100%
of the principal amount thereof plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the date of purchase, in accordance with the
procedures set forth in this Indenture. To the extent that the aggregate amount
of Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company and any Restricted Subsidiary may use any remaining Excess
Proceeds for general corporate purposes. If the aggregate principal amount of
Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any transaction (including the purchase, sale, lease
or exchange of property or the rendering of services) with any Affiliate (each
of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate
Transaction is on terms that are no less favorable to the Company or the
relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person and (ii) the Company delivers to the Trustee (a) with respect
to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $1.0 million, a resolution of the
Board of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and that such Affiliate
Transaction has been approved by a majority of the disinterested members of the
Board of Directors and (b) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in excess of
$10.0 million, an opinion as to the fairness to the Company of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing; provided that (w) any Exempt
Affiliate Transaction, (x) any compensation or indemnity arrangement with any
officer or
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director of the Company (pertaining to his or her duties as an officer or
director) entered into in the ordinary course of business, (y) transactions
between or among the Company and/or its Restricted Subsidiaries and (z)
Restricted Payments that are permitted by the provisions of Section 4.07 of this
Indenture, in each case, shall not be deemed Affiliate Transactions.
SECTION 4.12. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY OWNED
SUBSIDIARIES.
The Company (i) shall not, and shall not permit any Wholly Owned
Restricted Subsidiary of the Company or RCVP, VSI, SVS or VDSI to, transfer,
convey, sell, lease or otherwise dispose of any Capital Stock of any Wholly
Owned Restricted Subsidiary of the Company, RCVP, VSI, SVS or VDSI to any Person
(other than the Company or a Wholly Owned Restricted Subsidiary of the Company),
unless (a) such transfer, conveyance, sale, lease or other disposition is of all
the Capital Stock of such Wholly Owned Restricted Subsidiary, RCVP, VSI, SVS or
VDSI and (b) the Net Available Cash from such transfer, conveyance, sale, lease
or other disposition are applied in accordance with Section 4.10 hereof and (ii)
shall not permit any Wholly Owned Restricted Subsidiary of the Company or RCVP,
VSI, SVS or VDSI to issue any of its Equity Interests (other than, if necessary,
shares of its Capital Stock constituting directors' qualifying shares) to any
Person other than to the Company or a Wholly Owned Restricted Subsidiary of the
Company; provided that the Company may sell or cause to be issued to a third
party Equity Interests of Alliance Automaten GmbH & Co, KG or any other Wholly
Owned Restricted Subsidiary into which the Company consolidates or transfers its
Bally Wulff operations in advance of such offering of Equity Interests (provided
that the Equity Interests sold to a third party represent no more than 20% of
the Equity Interests of such entity outstanding immediately after such sale) if
such sale complies in all respects with the provisions of Section 4.10 hereof.
SECTION 4.13. LINE OF BUSINESS.
The Company shall not, and shall not permit any Restricted Subsidiary
to, engage in any business other than a Gaming Business, except to such extent
as would not be material to the Company and its Subsidiaries taken as a whole.
SECTION 4.14. CORPORATE EXISTENCE.
Subject to Article V hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders of the Notes.
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SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder of Notes
shall have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to
the offer described below (the "Change of Control Offer") at an offer price in
cash equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of purchase
(the "Change of Control Payment"). Subject to compliance with paragraph (b)
below, within 10 days following any Change of Control, the Company shall mail a
notice to each Holder stating: (1) that the Change of Control Offer is being
made pursuant to this Section 4.15 and that all Notes validly tendered will be
accepted for payment; (2) the purchase price and the purchase date, which shall
be no earlier than 30 days and no later than 60 business days from the date such
notice is mailed (the "Change of Control Payment Date"); (3) that any Note not
repurchased will continue to accrue interest; (4) that, unless the Company
defaults in the payment of the Change of Control Payment, all Notes accepted for
payment pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date; (5) that Holders electing to have any
Notes purchased pursuant to a Change of Control Offer will be required to
surrender the Notes, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the third Business Day
preceding the Change of Control Payment Date; (6) that Holders will be entitled
to withdraw their election if the Paying Agent receives, not later than the
close of business on the second Business Day preceding the Change of Control
Payment Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of Notes delivered for purchase,
and a statement that such Holder is withdrawing his election to have the Notes
purchased; and (7) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof.
(b) If the terms of the New Credit Facility prohibit the Company
from making the foregoing offer upon a Change of Control or from purchasing any
Notes pursuant thereto, prior to the mailing of the notice to Holders described
in the preceding paragraph, but in any event within 30 days following any Change
of Control, the Company covenants to (i) repay in full all indebtedness
outstanding under the New Credit Facility or offer to repay in full all such
indebtedness and repay the indebtedness of each lender who has accepted such
offer or (ii) obtain the requisite consent under the New Credit Facility to
permit the purchase of the Notes as described above. The Company must first
comply with the covenant described in the preceding sentence before it will be
required to purchase Notes in the event of a Change of Control; provided,
however, that the Company's failure to comply with the covenant described in the
preceding sentence or to make a Change of Control Offer because of any such
failure shall constitute a Default described in clause (d) of Section 6.01 (and
not under clause (b) or (c) thereof). The Company shall comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
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(c) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee, upon receipt of
an authentication order in the form of an Officers' Certificate from the
Company, will promptly authenticate and deliver (or cause to be transferred by
book entry) to each Holder a new Note equal in principal amount to the
unpurchased portion of the Notes surrendered, if any; provided that each such
new Note will be in a principal amount of $1,000 or an integral multiple
thereof. The Company shall publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
(d) The Company shall not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Indenture applicable to a Change of Control Offer
made by the Company and purchases all Notes validly tendered and not withdrawn
under such Change of Control Offer.
SECTION 4.16. NO SENIOR SUBORDINATED DEBT.
Notwithstanding the provisions of Section 4.09 hereof, the Company shall
not, and shall not permit any Guarantor to, incur (i) any Indebtedness if such
Indebtedness is expressly subordinate or junior in right of payment to any
Senior Debt of the Company or such Guarantor and senior in any respect of right
of payment to the Notes, or (ii) any Secured Indebtedness (other than
Indebtedness described under clause (xii) of Section 4.09 hereof) that is not
Senior Debt unless contemporaneously therewith effective provision is made to
secure the Notes or the relevant Guarantee, as applicable, equally and ratably
with such Secured Debt for so long as such Secured Debt is secured by a Lien.
SECTION 4.17. LIMITATION ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS.
Company shall not permit any domestic Restricted Subsidiary that is not
a Guarantor, directly or indirectly, to Guarantee or pledge any assets to secure
the payment of any other Indebtedness of the Company unless such Subsidiary
simultaneously executes and delivers a supplemental indenture to the Indenture
providing for the Subsidiary Guarantee of the payment of the Notes by such
Restricted Subsidiary, which Subsidiary Guarantee shall be senior to or pari
passu with such Restricted Subsidiary's Guarantee of or pledge to secure such
other Indebtedness (except in the case of Guarantees issued in respect of Senior
Debt, which shall be senior to any Subsidiary Guarantee of the payment of the
Notes). Notwithstanding the foregoing, (i) RCVP shall not be required to issue
such a Guarantee as a result of RCVP providing a Guarantee of the Company's
Obligations under the New Credit Facility or in respect of any similar Credit
Facility and (ii) any Guarantee of the Notes by a Restricted Subsidiary pursuant
to this covenant shall provide by its terms that it shall be automatically and
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unconditionally released and discharged upon any sale, exchange or transfer, to
any Person not an Affiliate of the Company, of all of the Company's stock in, or
all or substantially all the assets of, such Subsidiary, which sale, exchange or
transfer is made in compliance with the applicable provisions of the Indenture.
SECTION 4.18. REDEMPTION OF SERIES B PREFERRED STOCK.
On the date of this Indenture, the Company shall issue a notice of
redemption pursuant to the requirements of the certificate of designation
governing the rights of the Company's Series B Preferred Stock and, as soon as
practicable after the first day that redemption is permitted under such
certificate of designation, and in any event within 60 days following the giving
of such notice, shall redeem all of the Company's outstanding Series B Preferred
Stock.
SECTION 4.19. DESIGNATION OF AN UNRESTRICTED SUBSIDIARY AS A RESTRICTED
SUBSIDIARY.
The Company may designate any Unrestricted Subsidiary as a Restricted
Subsidiary, provided that (i) at the time of such designation, after giving pro
forma effect thereto as if such designation had occurred and as if any
Non-Recourse Debt previously incurred by such Unrestricted Subsidiary had been
incurred at the beginning of the Company's most recently completed four fiscal
quarters for which internal financial statements are available preceding the
date of such designation, (a) the Company would be permitted to incur $1.00 of
additional Indebtedness pursuant to the Consolidated Coverage Ratio test set
forth in Section 4.09, or (b) the Consolidated Coverage Ratio of the Company is
increased by such designation; (ii) except if not required under Section 11.10,
such newly designated Restricted Subsidiary executes and delivers a Subsidiary
Guarantee and an opinion of counsel relating to the enforceability and
authorization of such Subsidiary Guarantee as required by this Indenture; and
(iii) no Default has occurred and is continuing immediately preceding such
designation and after giving pro forma effect thereto.
SECTION 4.20. DESIGNATION OF A SUBSIDIARY AS AN UNRESTRICTED SUBSIDIARY.
The Company may designate any newly-organized Subsidiary as an
Unrestricted Subsidiary at the time of its formation, provided that such
Subsidiary has total assets of $1,000 or less at the time of such designation.
The Company may designate any Restricted Subsidiary as an Unrestricted
Subsidiary (at which time such Restricted Subsidiary's Guarantee will
terminate), provided that, (i) at the time of such designation after giving pro
forma effect thereto as if such designation had occurred at the beginning of the
Company's most recently completed four fiscal quarters for which internal
financial statements are available preceding the date of such designation, (A)
the Company would be permitted to incur $1.00 of additional Indebtedness
pursuant to the Consolidated Coverage Ratio test set forth in Section 4.09 and
(B) if the Restricted Subsidiary is a Key Subsidiary, the Consolidated Coverage
Ratio is not less than 80% of the Consolidated Coverage Ratio for such period
without giving pro forma effect to such designation; and (ii) no Default has
occurred and is continuing immediately preceding such designation and after
giving pro forma effect thereto, including the requirement set forth
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in Section 4.07 that any Investment in such Restricted Subsidiary be
deemed to be a Restricted Payment made on the date of such designation.
SECTION 4.21. LIMITATION ON STATUS AS INVESTMENT COMPANY.
The Company and its Subsidiaries shall take all actions (and refrain
from taking all actions) necessary to ensure that neither the Company nor any of
its Subsidiaries will be required to register as an "investment company" (as
that term is defined in the Investment Company Act of 1940, as amended), or will
otherwise become subject to regulation under the Investment Company Act.
ARTICLE V
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company shall not consolidate or merge with or into (whether or not
the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another corporation, Person or
entity unless (i) the Company is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Company under the Notes
and this Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (iii) immediately after such transaction no Default
or Event of Default exists; (iv) except in the case of a merger of the Company
with or into a Wholly Owned Restricted Subsidiary of the Company, the Company or
the entity or Person formed by or surviving any such consolidation or merger (if
other than the Company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (A) will have Consolidated
Net Worth immediately after the transaction equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the transaction and
(B) will, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Consolidated Coverage Ratio test set forth in
Section 4.09 hereof; and (v) any such transaction would not require the Holders
of Notes generally to obtain a Gaming License or be qualified under the laws of
any applicable gaming jurisdiction in the absence of such transactions, provided
that a transaction involving a jurisdiction that does not require the licensing
or qualification of any of the Holders of the Notes, but reserves the
discretionary right to require the licensing or qualification of any Holder of
Notes, shall not be prohibited pursuant to the terms of this clause (v).
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On or prior to the consummation of a proposed transaction contemplated
by Section 5.01, the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that (a) such consolidation,
merger, sale, assignment, conveyance, transfer, lease or disposition and such
supplemental indenture executed in connection therewith comply with this
Indenture and (b) such transaction will not impair the rights and powers of the
Trustee and Holders of the Notes thereunder. The Trustee shall be entitled to
conclusively rely upon such Officers' Certificate and Opinion of Counsel.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor Person
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all or
substantially all of the Company's properties or assets that meets the
requirements of Section 5.01 hereof.
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes and such default continues for a
period of 30 days (whether or not prohibited by the subordination provisions of
this Indenture);
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Notes when the same becomes due and payable at maturity,
upon redemption or otherwise (whether or not prohibited by the subordination
provisions of the Indenture);
(c) the Company fails to comply with the repurchase provisions set
forth in Section 4.10 hereof;
(d) the Company fails to observe or perform any other covenant,
representation, warranty or other agreement in this Indenture or the Notes for
60 days after notice in writing to the Company by the Trustee, or to the Company
and the Trustee by the
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Holders of at least 25% in principal amount of the Notes then outstanding,
specifying such default and requiring that it be remedied;
(e) a default occurs under any mortgage, indenture or instrument
under which there is issued or by which there is secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or
is created after the date of this Indenture, which default results in the
acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness the maturity of which has been so
accelerated, aggregates $10 million or more;
(f) the Company or any of its Significant Subsidiaries fails to pay
final judgments aggregating in excess of $10.0 million, which judgments are not
paid, discharged or stayed for a period of 60 days and, in the event such
judgments are covered by insurance, an enforcement proceeding has been commenced
by any creditor upon any of such judgments which is not promptly stayed;
(g) the Company or any of its Significant Subsidiaries pursuant to
or within the meaning of Bankruptcy Law: (i) commences a voluntary case, (ii)
consents to the entry of an order for relief against it in an involuntary case,
(iii) consents to the appointment of a Custodian of it or for all or
substantially all of its property or (iv) makes a general assignment for the
benefit of its creditors;
(h) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that: (i) is for relief against the Company or any of
its Significant Subsidiaries in an involuntary case; (ii) appoints a Custodian
of the Company or any of its Significant Subsidiaries or for all or
substantially all of the property of the Company or any of its Significant
Subsidiaries; or (iii) orders the liquidation of the Company or any of its
Significant Subsidiaries; and the order or decree remains unstayed and in effect
for 60 consecutive days;
(i) except as permitted by this Indenture, any Subsidiary Guarantee
shall be held in any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or any Guarantor, or any
Person acting on behalf of any Guarantor, shall deny or disaffirm its
obligations under its Subsidiary Guarantee; or
(j) any Gaming License of the Company or any of its Restricted
Subsidiaries is revoked, terminated or suspended or otherwise ceases to be
effective, resulting in the cessation or suspension, for a period of more than
90 days, of operations of any portion of the business of the Company or any of
its Restricted Subsidiaries that accounted for more than 10% of the Consolidated
Cash Flow of the Company for the period of the four consecutive fiscal quarters
most recently ended for which internal financial statements are available,
provided that any voluntary relinquishment of a Gaming License if such
relinquishment is, in the reasonable, good faith judgment of the Board of
Directors of the Company, evidenced by a resolution of such Board, both
desirable in the conduct of the business of the Company and
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its Restricted Subsidiaries, taken as a whole, and not disadvantageous in any
material respect to the Holders of the Notes, shall not constitute an Event of
Default hereunder.
SECTION 6.02. ACCELERATION.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes, by
notice in writing to the Company (and to the Trustee if such notice is given by
such Holders), may, and the Trustee at the request of such Holders shall,
declare all unpaid principal of, premium, if any, Liquidated Damages, if any,
and accrued interest on all Notes to be due and payable. Upon any such
declaration, such principal, premium, Liquidated Damages and interest on the
Notes shall become due and payable immediately; provided that if upon such
declaration there are any amounts outstanding under the New Credit Facility and
the amounts thereunder have not been accelerated, such principal and interest
shall be due and payable upon the earlier of such time such amounts are
accelerated or five Business Days after the receipt by the Company and the
Representative under the New Credit Facility of such declaration.
Notwithstanding the foregoing, if an Event of Default specified in clause (g) or
(h) of Section 6.01 hereof occurs with respect to the Company, all outstanding
Notes shall be due and payable immediately without further action or notice. The
Holders of a majority in aggregate principal amount of the then outstanding
Notes by written notice to the Trustee may on behalf of all of the Holders
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default
(except nonpayment of principal, interest or premium that has become due solely
because of the acceleration) have been cured or waived.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal, premium, if any, and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture. The Trustee may maintain a proceeding even if it does
not possess any of the Notes or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any Holder of a Note in exercising any
right or remedy accruing upon an Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Subject to Section 6.08, Holders of not less than a majority in
aggregate principal amount of the then outstanding Notes by written notice to
the Trustee may on behalf of the Holders of all of the Notes waive an existing
Default or Event of Default and its consequences hereunder, except a continuing
Default or Event of Default in the payment of the principal of, premium and
Liquidated Damages, if any, or interest on, the Notes. Upon any such waiver,
such Default shall cease to exist, and any Event of Default arising therefrom
shall be deemed to have been cured for every purpose of this Indenture; but no
such waiver shall extend to any subsequent or other Default or Event of Default
or impair any right consequent thereon. In the
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case of any such waiver, the Company, the Trustee and the Holders of all the
Notes shall be restored to their former positions and rights hereunder,
respectively.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding Notes
may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
(i) conflicts with law or this Indenture, (ii) the Trustee determines may be
unduly prejudicial to the rights of other Holders of Notes or (iii) may involve
the Trustee in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
No Holder of any Note shall have any right to order or direct the
Trustee to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder unless:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy in
respect of such Event of Default in its own name as Trustee hereunder;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense to be incurred or reasonably probable to be
incurred in compliance with such order or direction;
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note, except in the manner herein provided and for the equal and
ratable benefit of all the Holders.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note, or to bring suit for the enforcement of any such payment
on or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
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SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other papers
or documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money,
securities or other property payable or deliverable upon conversion or exchange
of the Notes or upon any such claims, and any custodian in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee, and in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due to it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article VI, it shall
pay out the money in the following order: first, to the Trustee, its agents and
attorneys for amounts due under Section 7.07 hereof, including payment of all
reasonable compensation, expense and liabilities incurred, and all reasonable
advances, if any, made, by the Trustee and the costs and expenses of collection;
second, to the holders of Senior Debt to the extent required by Article X;
third, to Holders of Notes for amounts due and unpaid on the Notes for
principal, premium and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium and Liquidated Damages, if any and
interest, respectively; and fourth, to the Company or to such party as a
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court of competent jurisdiction shall direct. The Trustee may fix a record date
and payment date for any payment to Holders of Notes pursuant to this Section
6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Note by its
acceptance thereof shall be deemed to have agreed, that in any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as a Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section does not apply to a
suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07
hereof, or a suit by Holders of more than 10% in principal amount of the then
outstanding Notes.
ARTICLE VII
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default, (i) the
duties of the Trustee shall be determined solely by the express provisions of
this Indenture and the Trustee need perform only those duties that are
specifically set forth in this Indenture and no others, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and (ii)
in the absence of bad faith on its part, the Trustee may conclusively rely, as
to the truth of the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Trustee and conforming
to the requirements of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that, (i) this paragraph does not limit the effect of
paragraph (b) of this Section; (ii) the Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer, unless it is
proved that the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it takes or
omits to take in good faith in accordance with a direction received by it
pursuant to Section 6.05 hereof.
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(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to the
provisions of this Section 7.01.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders, unless such Holder or Holders shall have offered to
the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may otherwise agree in writing with the
Company. Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed by
it to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both, which shall conform
to Sections 12.04 and 12.05. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on such Officers' Certificate
or Opinion of Counsel. The Trustee may consult with counsel and the advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection from liability in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture or the TIA.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
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(g) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters as it may
see fit.
(h) The Trustee shall have no duty to inquire as to the performance
with the Company's covenants in Article IV hereof or as to the performance by
any Agent of its duties hereunder. In addition, the Trustee shall not be deemed
to have knowledge of any Default or Event of Default except any Default or Event
of Default of which the Trustee shall have received written notification or with
respect to which a Responsible Officer or Trustee shall have actual knowledge.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with the Company or any Affiliate of
the Company with the same rights it would have if it were not Trustee. However,
subject to and in accordance with Section 310(b) of the TIA, in the event that
the Trustee acquires any conflicting interest it must eliminate such conflict
within 90 days, apply to the SEC for permission to continue as trustee or
resign. Any Agent may do the same with like rights and duties. The Trustee is
also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation as
to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, premium, if any, or
interest on any Note, the Trustee may withhold the notice if and so long as the
Board of Directors of the Trustee, the executive committee or a trust committee
of such Board of Directors and/or Responsible Officer in good faith determines
that withholding the notice is in the interests of the Holders of the Notes.
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SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, and for so long as Notes remain outstanding, the Trustee
shall mail to the Holders of the Notes a brief report dated as of such reporting
date that complies with TIA Section 313(a) (but if no event described in TIA
Section 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). If applicable, the Trustee also shall
comply with TIA Section 313(b) and Section 313(c).
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Company and filed with the SEC and each stock exchange on
which the Notes are listed in accordance with TIA Section 313(d). The Company
shall promptly notify the Trustee when the Notes are listed on any stock
exchange or automated quotation system.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services hereunder. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Company
shall reimburse the Trustee promptly upon request for all reasonable
disbursements, advances, if any, and expenses incurred or made by it in addition
to the compensation for its services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its gross
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
need not pay for any settlement made without its consent, which consent shall
not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the Trustee
shall have a Lien prior to the Notes on all money or property held or collected
by the Trustee, except money or property held in trust to pay principal and
interest on particular Notes.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and the
compensation for the
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services (including the fees and expenses of its agents and counsel) are
intended to constitute expenses of administration under any Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing and may appoint a
successor trustee with the Company's consent. The Company may remove the Trustee
and the Holder of any Notes who has been a beneficial Holder of a Note for at
least six months may, on behalf of such Holder and all Holders similarly
situated, petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor trustee if (a) the Trustee fails to
comply with Section 7.10 hereof; (b) the Trustee is adjudged a bankrupt or an
insolvent or an order for relief is entered with respect to the Trustee under
any Bankruptcy Law; (c) a Custodian or public officer takes charge of the
Trustee or its property; or (d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company or the court of competent
jurisdiction, as the case may be, shall promptly appoint a successor Trustee.
Within one year after the successor Trustee is appointed, the Holders of a
majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Company's obligations under Section 7.07 hereof shall
continue for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall, if such successor
corporation is otherwise eligible hereunder, be the successor Trustee.
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SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any creDitor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE VIII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article VIII.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive solely from the trust fund described in Section
8.04 hereof, and as more fully set forth in such Section, payments in respect of
the principal of, premium, if any, and interest on such Notes when such payments
are due, (b) the Company's obligations with respect to such Notes under Article
II (other than Section 2.12) and Section 4.02 hereof, (c) the rights, powers,
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trusts, duties and immunities of the Trustee and the Company's obligations in
connection therewith and (d) this Article VIII. Subject to compliance with this
Article VIII, the Company may exercise its option under this Section 8.02
notwithstanding the prior exercise of its option under Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.04, 4.07, 4.08, 4.09,
4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20, 4.21, 11.10 and the
provisions of Section 5.01(iv) and (v) hereof with respect to the outstanding
Notes on and after the date the conditions set forth below are satisfied
(hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed
not "outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder. For this purpose, Covenant Defeasance means
that, with respect to the outstanding Notes, the Company may omit to comply with
and shall have no liability in respect of any term, condition or limitation set
forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference in
any such covenant to any other provision herein or in any other document and
such omission to comply shall not constitute a Default or an Event of Default
under Section 6.01 hereof, but, except as specified above, the remainder of this
Indenture and such Notes shall be unaffected thereby. In addition, upon the
Company's exercise under Section 8.01 hereof of the option applicable to this
Section 8.03 hereof, subject to the satisfaction of the conditions set forth in
Section 8.04 hereof, Sections 6.01(c) through 6.01(f) hereof shall not
constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient (without the need to reinvest), in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal of,
premium and Liquidated Damages, if any, and interest on the outstanding Notes on
the stated date for payment thereof or on the applicable redemption date, as the
case may be;
(b) in the case of an election under Section 8.02 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal
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Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the incurrence of Indebtedness all or a portion of the proceeds
of which will be used to defease the Notes pursuant to this Article VIII
concurrently with such incurrence) or insofar as Sections 6.01(g) or 6.01(h)
hereof is concerned, at any time in the period ending on the 91st day after the
date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any material agreement
or instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
(f) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company; and
(g) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee and the Paying Agent
against any tax, fee or other charge imposed on or assessed against the cash or
non-callable Government
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Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article VIII to the contrary notwithstanding, the
Trustee and the Paying Agent shall deliver or pay to the Company from time to
time upon the request of the Company any money or non-callable Government
Securities held by it as provided in Section 8.04 hereof which, in the opinion
of a nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.04(a) hereof), are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and, without limiting the effect of any applicable
abandoned property law, the Holder of such Note shall thereafter, as a general
creditor, look only to the Company for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all liability
of the Company as trustee thereof, shall thereupon cease; provided, however,
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in the
New York Times and The Wall Street Journal (national edition), notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
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SECTION 8.08. SUBORDINATION.
Notwithstanding anything to the contrary herein, the rights and
obligations of the parties under this Article VIII are subject to the
subordination provisions set forth in Article X of this Indenture to the extent
set forth therein.
ARTICLE IX
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company and the
Trustee may amend or supplement this Indenture or the Notes without the consent
of any Holder of a Note (a) to cure any ambiguity, defect or inconsistency; (b)
to provide for uncertificated Notes in addition to or in place of certificated
Notes; (c) to provide for the assumption of the Company's obligations to the
Holders of the Notes in the case of a merger or consolidation pursuant to
Article V hereof; (d) to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not adversely affect
the legal rights hereunder of any Holder of the Note in any material respect; or
(e) to comply with requirements of the SEC in order to effect or maintain the
qualification of this Indenture under the TIA. Upon the request of the Company
accompanied by a resolution of its Board of Directors authorizing the execution
of any such amended or supplemental Indenture, and upon receipt by the Trustee
of the documents described in Section 7.02 hereof, the Trustee shall join with
the Company in the execution of any amended or supplemental Indenture authorized
or permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations that may be therein contained, but the Trustee shall
not be obligated to enter into such amended or supplemental Indenture that
affects its own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
(a) Except as provided below in this Section 9.02, the Company and
the Trustee may amend or supplement this Indenture (including Sections 3.09,
4.10 and 4.15 hereof) and the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the Notes
then outstanding (including consents obtained in connection with a tender offer
or exchange offer for the Notes), and, subject to Sections 6.04 and 6.07 hereof,
any existing Default or Event of Default (other than a Default or Event of
Default in the payment of the principal of, premium, if any, or interest on the
Notes, except a payment default resulting from an acceleration that has been
rescinded) or compliance with any provision of this Indenture or the Notes may
be waived with the consent of the Holders of a majority in principal amount of
the then outstanding Notes (including consents obtained in connection with a
tender offer or exchange offer for the Notes). Upon the request of the Company
accompanied by a resolution of its Board of Directors authorizing the execution
of any such amended or supplemental Indenture, and upon the filing with the
Trustee of evidence satisfactory to the Trustee of the consent of the Holders of
Notes as aforesaid, and upon receipt
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by the Trustee of the documents described in Section 7.02 hereof, the Trustee
shall join with the Company in the execution of such amended or supplemental
Indenture unless such amended or supplemental Indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such amended or supplemental Indenture.
(b) It shall not be necessary for the consent of the Holders of
Notes under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
(c) After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver.
(d) Notwithstanding the foregoing, without the consent of each
Holder affected, an amendment or waiver may not (with respect to any Notes held
by a non-consenting Holder):
(i) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(ii) reduce the principal of or change the fixed maturity of
any Note or alter or waive any of the provisions with respect to the redemption
of the Notes except as provided above with respect to Sections 3.09, 4.10 and
4.15 hereof;
(iii) reduce the rate of or change the time for payment of
interest, including default interest, on any Note;
(iv) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a rescission
of acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the then outstanding Notes and a waiver of the payment
default that resulted from such acceleration);
(v) make any Note payable in money other than that stated in
the Notes;
(vi) make any change in the provisions of this Indenture
relating to waivers of past Defaults or the rights of Holders of Notes to
receive payments of principal of or premium, if any, or interest on the Notes;
(vii) waive a redemption payment with respect to any Notes
except as provided above with respect to Sections 3.09, 4.10 and 4.15 hereof; or
(viii) make any change in the foregoing amendment and waiver
provisions.
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(e) In connection with any amendment, supplement or waiver under
this Article X, the Company may, but shall not be obligated to, offer to any
Holder who consents to such amendment, supplement or waiver, or to all Holders,
consideration for such Holder's consent to such amendment, supplement or waiver.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in a amended or supplemental Indenture that complies with the TIA as
then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent to
it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
authentication order in the form of an Officers' Certificate from the Company,
authenticate and deliver new Notes that reflect the amendment, supplement or
waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article IX if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
may not sign an amendment or supplemental Indenture until the Board of Directors
approves it. In executing any amended or supplemental indenture, the Trustee
shall be entitled to receive and (subject to Section 7.01) shall be fully
protected in conclusively relying upon, an Officer's Certificate and an Opinion
of Counsel stating that the execution of such amended or supplemental indenture
is authorized or permitted by this Indenture.
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SECTION 9.07. SUBORDINATION.
Notwithstanding anything to the contrary herein, no amendment may be
made to the subordination provisions set forth in Article X or XII or elsewhere
in this Indenture or the Notes if such amendment adversely affects the rights of
any holder of Senior Debt then outstanding unless the holders of such Senior
Debt (or their Representative) consent to such change.
ARTICLE X
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE.
The Company agrees, and each holder of a Note by accepting a Note
agrees, that the payment of principal of, premium, if any, and interest and
Liquidated Damages on, and all other Obligations with respect to, the Notes are
subordinated in right of payment, to the extent and in the manner provided in
this Article X, to the prior payment in full, in cash, of all Obligations with
respect to Senior Debt (whether outstanding on the date hereof or hereafter
created, incurred, assumed or guaranteed), including the obligations of the
Company and the Guarantors under the New Credit Facility, and that the
subordination is for the benefit of, and shall be enforceable directly by, the
holders of Senior Debt of the Company.
SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any payment or distribution to creditors of the Company in a
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, or upon an assignment for the benefit of creditors or any marshalling
of the Company's assets and liabilities, in each case whether voluntary or
involuntary:
(a) the holders of Senior Debt of the Company shall be entitled to
receive payment in full in cash of all Obligations due in respect of such Senior
Debt (including all interest accruing after the commencement of any such
proceeding at the rate specified in the applicable Senior Debt, whether or not
such interest is an allowed claim under applicable law) before Holders of Notes
shall be entitled to receive any payment or distribution with respect to the
Notes (except that Holders of Notes may receive payments made from any trust
created pursuant to Section 8.05 hereof so long as, at the time of deposit
thereof in such trust, such payments did not violate this Article X and
otherwise complied with the provisions of Article VIII); and
(b) until all Obligations with respect to Senior Debt of the Company
are paid in full in cash, any payment or distribution to which Holders of Notes
would be entitled but for this Article X shall be made to holders of Senior Debt
of the Company (except that Holders of Notes may receive payments made from any
trust created pursuant to Section 8.05 hereof so
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long as, at the time of deposit thereof in such trust, such payments did not
violate this Article X and otherwise complied with the provisions of Article
VIII).
SECTION 10.03. DEFAULT ON SENIOR DEBT.
In addition to the provisions of preceding Section 10.02, neither the
Company nor any Person on its behalf may make any payment (in cash, property or
other assets) upon or in respect of the Notes (other than payments made from any
trust created pursuant to Section 8.05 hereof so long as, at the time of deposit
thereof in such trust, such payments did not violate this Article X and
otherwise complied with the provisions of Article VIII) until all principal and
other Obligations with respect to all Senior Debt of the Company have been paid
in full in cash if:
(a) any Obligations with respect to Senior Debt of the Company are
not paid when due; or
(b) any other default on Designated Senior Debt occurs and is
continuing that then permits holders of the Designated Senior Debt as to which
such default relates to accelerate its maturity and the Trustee receives a
notice of such default (a "Payment Blockage Notice") from the Representative of
the holders of such Designated Senior Debt.
The Company may and shall resume payments on the Notes:
(a) in cases where clause (a) of the immediately preceding paragraph
is applicable, upon such date when all payment defaults as described therein are
cured or waived, or
(b) in the case described in clause (b) of the immediately preceding
paragraph, 179 days after the date on which the applicable Payment Blockage
Notice is received (or earlier if the respective payment blockage period is
terminated (i) by written notice to the Trustee and the Company from the person
or persons who gave the respective Payment Blockage Notice or (ii) because no
defaults continue in existence which would permit the acceleration of maturity
of any Designated Senior Debt at such time), unless the maturity of any
Designated Senior Debt has been accelerated (with each payment blockage period
described above in this clause (b) being herein called a ("Payment Blockage
Period").
No new Payment Blockage Period may be commenced pursuant to clause (b)
of the first paragraph of this Section 10.03 unless and until 360 days have
elapsed since the effectiveness of the immediately prior Payment Blockage
Notice. No nonpayment default which existed or was continuing (it being
acknowledged that any subsequent action that would give rise to a default
pursuant to any provision under which a default previously existed or was
continuing, and any failure to comply with a financial covenant for a subsequent
period, shall constitute a new default for this purpose) on the date of the
commencement of any Payment Blockage Period shall be the basis of the
commencement of a subsequent Payment Blockage Period by the Representative of
such Designated Senior Debt, even if not within a period of 360 consecutive
days, unless such default shall have been cured or waived for a period of not
less than 90 consecutive days.
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SECTION 10.04. ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of Default,
the Company shall promptly notify holders of Senior Debt of the acceleration.
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder of Notes receives any
payment of any Obligations with respect to the Notes at a time when such payment
is prohibited by Section 10.02 or 10.03 hereof, such payment shall be held by
the Trustee or such Holder of Notes, in trust for the benefit of, and shall be
paid forthwith over and delivered, upon written request, to, the holders of
Senior Debt of the Company as their interests may appear or their Representative
under the indenture or other agreement (if any) pursuant to which Senior Debt
may have been issued, as their respective interests may appear, for application
to the payment of all Obligations with respect to Senior Debt of the Company
remaining unpaid to the extent necessary to pay such Obligations in full in cash
in accordance with their terms, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Debt of the Company .
With respect to the holders of Senior Debt of the Company, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article X, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. Notwithstanding anything to the contrary herein,
the Trustee shall not be deemed to owe any fiduciary duty to any present or
future holders of Senior Debt, and shall not be liable to any such holders if
the Trustee shall pay over or distribute to or on behalf of Holder of Notes or
the Company or any other Person money or assets to which any holders of Senior
Debt shall be entitled by virtue of this Article X and in Article XII, except if
such payment is made as a result of the willful misconduct or gross negligence
of the Trustee.
SECTION 10.06. NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article X, but failure to give such
notice shall not affect the subordination of the Notes to the Senior Debt as
provided in this Article X.
SECTION 10.07. SUBROGATION.
After all Obligations with respect to Senior Debt of the Company are
paid in full in cash and until the Notes are paid in full, Holder of Notes shall
be subrogated (equally and ratably with all other Indebtedness pari passu with
the Notes) to the rights of holders of Senior Debt of the Company to receive
distributions applicable to Senior Debt of the Company to the extent that
distributions otherwise payable to the Holder of Notes have been applied to the
payment of Senior Debt of the Company. A distribution made under this Article X
to holders of Senior Debt of the Company that otherwise would have been made to
Holders of Notes is
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not, as between the Company and such Holders of Notes, a payment by the Company
on the Notes.
SECTION 10.08. RELATIVE RIGHTS.
This Article X defines the relative rights of Holders of Notes and
holders of Senior Debt. Nothing in this Indenture shall:
(a) impair, as between the Company and Holders of Notes, the
obligation of the Company, which is absolute and unconditional, to pay principal
of and interest on the Notes in accordance with their terms;
(b) affect the relative rights of Holders of Notes and creditors of
the Company other than their rights in relation to holders of Senior Debt of the
Company; or
(c) prevent the Trustee or any Holder of Notes from exercising its
available remedies upon a Default or Event of Default, subject to the rights of
holders and owners of Senior Debt of the Company to receive distributions and
payments otherwise payable to Holders of Notes.
If the Company fails because of this Article X to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event of
Default in accordance with the provisions of Section 6.01.
SECTION 10.09. SUBORDINATION MAY NOT BE IMPAIRED BY ACTS OF OMISSIONS OF
THE COMPANY OR HOLDERS OF SENIOR DEBT.
No right of any present or future holders of any Senior Debt to enforce
subordination as provided herein shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
of failure to act, in good faith, by any such holder, or by any noncompliance by
the Company with the terms of this Indenture, regardless of any knowledge
thereof which any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Trustee, without incurring responsibility to the
Trustee or the Holders of the Notes and without impairing or releasing the
subordination provided in this Article X or the obligations hereunder of the
Holders of the Notes to the holders of the Senior Debt, do any one or more of
the following: (i) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, Senior Debt, or otherwise amend or
supplement in any manner Senior Debt, or any instrument evidencing the same or
any agreement under which Senior Debt is outstanding; (ii) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Debt; (iii) release any Person liable in any manner for the
payment or collection of Senior Debt; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
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SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to in
this Article X, the Trustee and the Holders of Notes shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders of Notes
for the purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article X.
SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article X or any other provision
of this Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least one Business Day prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article X. Only the Company, a
Guarantor, a holder of Senior Debt or a Representative for holders of Senior
Debt may give the notice. Nothing in this Article X shall (x) impair the claims
of, or payments to, the Trustee under or pursuant to Section 7.07 hereof or (y)
affect the Obligations of Holders of Notes pursuant to Section 10.05 with
respect to any payments received by them when prohibited by Section 10.02 or
10.03 hereof, as the case may be.
The Trustee in its individual or any other capacity may hold Senior Debt
of the Company with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights.
SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Note by the Holder's acceptance thereof authorizes and
directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article X, and appoints the Trustee to act as the Holder's attorney-in-fact for
any and all such purposes. If the Trustee does not file a proper proof of claim
or proof of debt in the form required in any proceeding referred to in Section
6.09 hereof at least 30 days before the expiration of the time to file such
claim, the Representative is hereby authorized to file an appropriate claim for
and on behalf of the Holders of the Notes.
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SECTION 10.13. AMENDMENTS.
The provisions of this Article X shall not be amended or modified in any
manner that is adverse to the holders of any Senior Debt without the written
consent of all such holders of Senior Debt or their Representative.
ARTICLE XI
GUARANTEES
SECTION 11.01. UNCONDITIONAL GUARANTEE.
Subject to the provisions of this Article XI, each Guarantor hereby
unconditionally, jointly and severally, on a senior subordinated basis,
guarantees (each such Guarantee being a "Subsidiary Guarantee" and all such
Guarantees being the "Subsidiary Guarantees") to each Holder of a Note
authenticated and delivered by the Trustee and to the Trustee and its successors
and assigns, irrespective of the validity and enforceability of the Notes or
this Indenture, that: (i) the principal of and interest and Liquidated Damages,
if any, on the Notes will be promptly paid in full when due, subject to any
applicable grace period, whether at maturity, by
acceleration or otherwise and interest on the overdue principal, if any, and
interest on any interest to the extent lawful, of the Notes and all other
obligations of the Company to the Holders or the Trustee hereunder or thereunder
will be promptly paid in full or performed all in accordance with the terms
hereof and thereof; and (ii) in case of any extension of time of payment or
renewal of any Notes or of any such other obligations, the same will be promptly
paid in full when due or performed in accordance with the terms of the extension
or renewal, subject to any applicable grace period, whether at stated maturity,
by acceleration or otherwise, subject, however, in the case of clauses (i) and
(ii) above, to the limitations set forth in Section 11.05. Each Guarantor hereby
agrees that its obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Notes or this Indenture, the
absence of any action to enforce the same, any waiver or consent by any Holder
of the Notes with respect to any provisions hereof or thereof, the recovery of
any judgment against the Company, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a Guarantor. Each Guarantor hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against the
Company, protest, notice and all demands whatsoever and covenants that the
Subsidiary Guarantees will not be discharged except by complete performance of
the obligations contained in the Notes, this Indenture and in the Subsidiary
Guarantees. If any Holder of Notes or the Trustee is required by any court or
otherwise to return to the Company, any Guarantor, or any custodian, trustee,
liquidator or other similar official acting in relation to the Company or any
Guarantor, any amount paid by the Company or any Guarantor to the Trustee or
such Holder of Notes, the Subsidiary Guarantees, to the extent theretofore
discharged, shall be reinstated in full force and effect. Each Guarantor further
agrees that, as between each Guarantor, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the obligations guaranteed
hereby may be accelerated as provided in Article VI for the purposes of the
Subsidiary Guarantees, notwithstanding any stay, injunction or other
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prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any acceleration of such obligations
as provided in Article VI, such obligations (whether or not due and payable)
shall forthwith become due and payable by each Guarantor for the purpose of the
Subsidiary Guarantees.
SECTION 11.02. SUBORDINATION OF GUARANTEE.
The obligations of each Guarantor under the Subsidiary Guarantees and
under this Indenture are expressly subordinate and subject in right of payment
to the prior payments in full in cash of all Obligations with respect to Senior
Debt of such Guarantor, to the extent and in the manner provided in Article XII.
SECTION 11.03. SEVERABILITY.
In case any provision of this Guarantee shall be invalid, illegal or
unenforceable, the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 11.04. RELEASE OF A GUARANTOR.
In the event of a sale or other disposition of all of the assets of any
Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all of the capital stock of any Guarantor, then such Guarantor
(in the event of a sale or other disposition, by way of such a merger,
consolidation or otherwise, of all of the capital stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of such Guarantor) shall
be released and relieved of any obligations under its Subsidiary Guarantee;
provided that the Net Available Cash of such sale or other disposition shall be
applied in accordance with Section 4.10 and the other applicable provisions of
the Indenture. The Trustee shall deliver an appropriate instrument evidencing
such release upon receipt of a request by the Company accompanied by an
Officers' Certificate certifying as to the compliance with this Section 11.04.
Any Guarantor not so released remains liable for the full amount of principal of
and interest on the Notes as provided in this Article XI.
SECTION 11.05. LIMITATION OF GUARANTOR'S LIABILITY.
Each Guarantor and by its acceptance of a Note each Holder confirms that
it is the intention of all such parties that the Subsidiary Guarantee by such
Guarantor pursuant to its Subsidiary Guarantee does not constitute a fraudulent
transfer or conveyance for purposes of the Bankruptcy Law, the Uniform
Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar
federal or state law. To effectuate the foregoing intention, the Holders and
such Guarantor hereby irrevocably agree that the obligations of such Guarantor
under the Subsidiary Guarantees shall be limited to the maximum amount as will,
after giving effect to all other contingent and fixed liabilities of such
Guarantor (including without limitation all guarantees of such Guarantor given
in respect of the New Credit Facility and all other Senior Debt of such
Guarantor) and after giving effect to any collections from or
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payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under the Subsidiary Guarantees or pursuant
to Section 11.07, result in the obligations of such Guarantor under the
Subsidiary Guarantees not constituting such fraudulent transfer or conveyance.
SECTION 11.06. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
No Guarantor may consolidate with or merge with or into (whether or not
such Guarantor is the surviving Person), another corporation, Person or entity
whether or not affiliated with such Guarantor (other than mergers with or into
the Company or another Guarantor) unless (i) subject to the provisions of
Section 11.04, the Person formed by or surviving any such consolidation or
merger (if other than such Guarantor) assumes all the obligations of such
Guarantor pursuant to a supplemental indenture in form and substance reasonably
satisfactory to the Trustee, under the Notes and this Indenture; and (ii)
immediately after giving effect to such transaction, no Default or Event of
Default exists.
SECTION 11.07. CONTRIBUTION.
In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, inter se, that in the event any payment or
distribution is made by any Guarantor (a "Funding Guarantor") under the
Subsidiary Guarantees, such Funding Guarantor shall be entitled to a
contribution from all other Guarantors in a pro rata amount based on the net
assets of each Guarantor (including the Funding Guarantor) for all payments,
damages and expenses incurred by that Funding Guarantor in discharging the
Company's obligations with respect to the Notes or any other Guarantor's
obligations with respect to the Subsidiary Guarantees.
SECTION 11.08. WAIVER OF SUBROGATION.
Each Guarantor hereby irrevocably waives, until and unless all of the
Obligations guaranteed hereby are indefeasibly discharged, any claim or other
rights which it may now or hereafter acquire against the Company that arise from
the existence, payment, performance or enforcement of such Guarantor's
obligations under the Subsidiary Guarantees and this Indenture, including,
without limitation, any right of subrogation, reimbursement, exoneration,
indemnification, and any right to participate in any claim or remedy of any
Holder of Notes against the Company, whether or not such claim, remedy or right
arises in equity, or under contract, statute or common law, including, without
limitation, the right to take or receive from the Company, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim or other rights. If any amount
shall be paid to any Guarantor in violation of the preceding sentence and the
Notes shall not have been paid in full, such amount shall have been deemed to
have been paid to such Guarantor for the benefit of, and held in trust for the
benefit of, the Holders of the Notes, and shall forthwith be paid to the Trustee
for the benefit of such Holders to be credited and applied upon the Notes,
whether matured or unmatured, in accordance with the terms of this Indenture.
Each Guarantor acknowledges that it will receive direct and indirect benefits
from the financing arrangements
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contemplated by this Indenture and that the waiver set forth in this Section
11.08 is knowingly made in contemplation of such benefits.
SECTION 11.09. EXECUTION OF GUARANTEE.
To evidence their guarantee to the Holder of Notes specified in Section
11.01, the Guarantors hereby agree to execute the Subsidiary Guarantees in
substantially the form of Exhibit A recited to be endorsed on each Note ordered
to be authenticated and delivered by the Trustee. Each Guarantor hereby agrees
that the Subsidiary Guarantees set forth in Section 11.01 shall remain in full
force and effect notwithstanding any failure to endorse on each Note a notation
of the Subsidiary Guarantees. Each such Subsidiary Guarantee shall be signed on
behalf of each Guarantor by two Officers, or an Officer and an Assistant
Secretary, or one Officer shall sign and one Officer or an Assistant Secretary
(each of whom shall, in each case, have been duly authorized by all requisite
corporate actions) shall attest to such Subsidiary Guarantee prior to the
authentication of the Note on which it is endorsed, and the delivery of such
Note by the Trustee, after the authentication thereof hereunder, shall
constitute due delivery of such Subsidiary Guarantee on behalf of such
Guarantor. Such signatures upon the Subsidiary Guarantees may be by manual or
facsimile signature of such officers and may be imprinted or otherwise
reproduced on the Subsidiary Guarantees, and in case any such officer who shall
have signed the Subsidiary Guarantees shall cease to be such officer before the
Note on which such Guarantee is endorsed shall have been authenticated and
delivered by the Trustee or disposed of by the Company, such Note nevertheless
may be authenticated and delivered or disposed of as though the person who
signed the Subsidiary Guarantees had not ceased to be such officer of the
Guarantor.
SECTION 11.10. ADDITIONAL SUBSIDIARY GUARANTEES.
If the Company or any of its Restricted Subsidiaries shall acquire or
create another Subsidiary after the date of the Indenture, then such newly
acquired or created Subsidiary shall execute a Subsidiary Guarantee and deliver
an opinion of counsel relating to the enforceability and authorization of such
Subsidiary Guarantee in accordance with the terms of the Indenture, pursuant to
which such Subsidiary shall become a Guarantor, on a senior subordinated basis,
of the Company's payment obligations under the Notes and this Indenture;
provided, that this covenant shall not apply to any Subsidiary during such
period as such Subsidiary (w) is organized in any jurisdiction outside the
United States, (x) is organized in any jurisdiction in which the issuance of a
Subsidiary Guarantee requires regulatory approval by a Gaming Authority,
provided that the Company or such Subsidiary has made a good faith effort to
obtain such approval and such approval is denied, (y) has been properly
designated as an Unrestricted Subsidiary in accordance with this Indenture for
so long as it continues to constitute an Unrestricted Subsidiary or (z) has less
than $100,000 of outstanding Indebtedness owed to any Person other than the
Company or any Restricted Subsidiary. Notwithstanding the foregoing, each of
RCVP, VSI, SVS and VDSI shall become subject to the terms of this covenant upon
becoming a Wholly Owned Restricted Subsidiary.
ARTICLE XII
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SUBORDINATION OF GUARANTEES
SECTION 12.01. AGREEMENT TO SUBORDINATE.
Each Guarantor agrees, and each holder of a Note by accepting a Note
agrees, that the payment of principal of, premium, if any, and interest and
Liquidated Damages on, and all other Obligations with respect to, the Notes are
subordinated in right of payment, to the extent and in the manner provided in
this Article XII, to the prior payment in full, in cash, of all Obligations with
respect to Senior Debt (whether outstanding on the date hereof or hereafter
created, incurred, assumed or guaranteed) of the Guarantor; including the
obligations of the Guarantors under, or with respect to, the New Credit
Facility, and that the subordination is for the benefit of, and shall be
enforceable directly by, the holders of Senior Debt of the Guarantor.
SECTION 12.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any payment or distribution to creditors of any Guarantor in a
liquidation or dissolution of such Guarantor or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to such Guarantor or its
property, or upon an assignment for the benefit of creditors or any marshalling
of such Guarantor's assets and liabilities, in each case whether voluntary or
involuntary:
(a) the holders of Senior Debt of such Guarantor shall be entitled
to receive payment in full in cash of all Obligations due in respect of such
Senior Debt (including all interest accruing after the commencement of any such
proceeding at the rate specified in the applicable Senior Debt, whether or not
such interest is an allowed claim under applicable law) before Holders of Notes
shall be entitled to receive any payment or distribution with, under or with
respect to, the Subsidiary Guarantee of such Guarantor (except that Holders of
Notes may receive payments made from any trust created pursuant to Section 8.05
hereof so long as, at the time of deposit thereof in such trust, such payments
did not violate this Article XII and otherwise complied with the provisions of
Article VIII); and
(b) until all Obligations with respect to all Senior Debt of such
Guarantor are paid in full in cash, any payment or distribution to which Holders
of Notes would be entitled but for this Article XII shall be made to holders of
Senior Debt of such Guarantor (except that Holders of Notes may receive payments
made from any trust created pursuant to Section 8.05 hereof so long as, at the
time of deposit thereof in such trust, such payments did not violate this
Article XII and otherwise complied with the provisions of Article VIII).
SECTION 12.03. DEFAULT ON SENIOR DEBT.
In addition to the provisions of preceding Section 12.02, no Guarantor
nor any Person on its behalf may make any payment (in cash, property or other
assets) upon or in respect of the Notes or any Subsidiary Guarantee (other than
payments made from any trust created pursuant to Section 8.05 hereof so long as,
at the time of deposit thereof in such trust, such payments did not violate this
Article XII and otherwise complied with the provisions of Article
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VIII) until all principal and other Obligations with respect to all Senior Debt
of such Guarantor has been paid in full in cash if:
(a) any Obligations with respect to Senior Debt of, or guaranteed
by, such Guarantor are not paid when due; or
(b) any Payment Blockage Period is then in effect pursuant to
Section 10.03.
The Company may and shall resume payments on the Notes:
(a) in cases where clause (a) of the immediately preceding paragraph
is applicable, upon such date when all payment defaults as described therein are
cured or waived, or
(b) in the case described in clause (b) of the immediately preceding
paragraph, when the respective Payment Blockage Period has ended in accordance
with the provisions of Section 10.03 unless the maturity of any Designated
Senior Debt has been accelerated.
SECTION 12.04. ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of Default,
each Guarantor shall promptly notify, or cause to be notified, holders of Senior
Debt of such Guarantor of the acceleration.
SECTION 12.05. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder of Notes receives any
payment of any Obligations with respect to any Subsidiary Guarantee at a time
when such payment is prohibited by Section 12.02 or 12.03 hereof, such payment
shall be held by the Trustee or such Holder of Notes in trust for the benefit
of, and shall be paid forthwith over and delivered, upon written request, to,
the holders of Senior Debt of the respective Guarantor as their interests may
appear or their Representative under the indenture or other agreement (if any)
pursuant to which Senior Debt of the Guarantor may have been issued, as their
respective interests may appear, for application to the payment of all
Obligations with respect to Senior Debt of the respective Guarantor remaining
unpaid to the extent necessary to pay such Obligations in full in cash in
accordance with their terms, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Debt of the respective Guarantor.
With respect to the holders of Senior Debt of the Guarantors, the
Trustee undertakes to perform only such obligations on the part of the Trustee
as are specifically set forth in Article X and in this Article XII, and no
implied covenants or obligations with respect to the holders of Senior Debt of
the Guarantors shall be read into this Indenture against the Trustee.
Notwithstanding anything to the contrary herein, the Trustee shall not be deemed
to owe any fiduciary duty to any present or future holders of Senior Debt of
such Guarantors, and shall not be liable to any such holders if the Trustee
shall pay over or distribute to or on behalf of Holder of Notes or the Company
or any other Person money or assets to which any holders
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<PAGE> 76
of Senior Debt of such Guarantors shall be entitled by virtue of this Article
XII, except if such payment is made as a result of the willful misconduct or
gross negligence of the Trustee.
SECTION 12.06. NOTICE BY GUARANTORS.
Each Guarantor shall promptly notify the Trustee and the Paying Agent of
any facts known to such Guarantor that would cause a payment of any Obligations
with respect to the Subsidiary Guarantees to violate this Article XII, but
failure to give such notice shall not affect the subordination of the Subsidiary
Guarantees to the Senior Debt of the Guarantors as provided in this Article XII.
SECTION 12.07. SUBROGATION.
After all Obligations with respect to Senior Debt of the Guarantors are
paid in full in cash and until the Notes are paid in full, Holders of Notes
shall be subrogated (equally and ratably with all other Indebtedness pari passu
with the Notes) to the rights of holders of Senior Debt of the Guarantor to
receive distributions applicable to Senior Debt of the Guarantor to the extent
that distributions otherwise payable to the Holders of Notes have been applied
to the payment of Senior Debt of the Guarantor. A distribution made under this
Article XII to holders of Senior Debt of the Guarantor that otherwise would have
been made to Holders of Notes is not, as between the Company and such Holders of
Notes, a payment of the Guarantor on the Notes.
SECTION 12.08. RELATIVE RIGHTS.
This Article XII defines the relative rights of Holders of Notes and
holders of Senior Debt of the Guarantor. Nothing in this Indenture shall:
(a) impair, as between the Guarantors and Holders of Notes, the
obligation of the Guarantors, which is absolute and unconditional, to pay
principal of and interest on the Notes in accordance with the terms of the
Subsidiary Guarantees;
(b) affect the relative rights of Holders of Notes and creditors of
the Guarantors other than their rights in relation to holders of Senior Debt of
the Guarantors; or
(c) prevent the Trustee or any Holder of Notes from exercising its
available remedies upon a Default or Event of Default, subject to the rights of
holders and owners of Senior Debt of the Guarantors to receive distributions and
payments otherwise payable to Holders of Notes.
If the Company fails because of this Article XII to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event of
Default in accordance with the provisions of Section 6.01.
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<PAGE> 77
SECTION 12.09. SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS OF
THE GUARANTORS OR HOLDERS OF SENIOR DEBT.
No right of any present or future holders of any Senior Debt of any
Guarantor to enforce subordination as provided herein shall at any time in any
way be prejudiced or impaired by any act or any failure to act on the part of
any Guarantor or by any act of failure to act, in good faith, by any such
holder, or by any noncompliance by any Guarantor with the terms of this
Indenture, regardless of any knowledge thereof which any such holder may have or
otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt of a Guarantor may, at any time and from time to
time, without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders of the Notes and without impairing
or releasing the subordination provided in this Article XII or the obligations
hereunder of the Holders of the Notes to the holders of such Senior Debt, do any
one or more of the following: (i) change the manner, place or terms of payment
or extend the time of payment of, or renew or alter, such Senior Debt, or any
instrument evidencing the same or any agreement under which such Senior Debt is
outstanding; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing such Senior Debt; (iii) release any
Person liable in any manner for the payment or collection of Senior such Debt;
and (iv) exercise or refrain from excising any rights against such Guarantor and
any other Person.
SECTION 12.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt of any Guarantor, the distribution may be made and the notice given
to their Representative.
Upon any payment or distribution of assets of any Guarantor referred to
in this Article XII, the Trustee and the Holders of Notes shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the Holders
of Notes for the purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of the Senior Debt and other Indebtedness of the
respective Guarantor, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent thereto or to
this Article XII.
SECTION 12.11. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article XII or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least one Business Day prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article XII. Only the Company, a
Guarantor, a Representative or
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<PAGE> 78
a holder of Senior Debt of a Guarantor may give the notice. Nothing in this
Article XII shall (i) impair the claims of, or payments to, the Trustee under or
pursuant to Section 7.07 hereof or (ii) affect the Obligations of Holders of
Notes pursuant to Section 12.05 with respect to any payments received by them
when prohibited by Section 12.02 or 10.03 hereof, as the case may as be.
The Trustee in its individual or any other capacity may hold Senior Debt
of any Guarantor with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights.
SECTION 12.12. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Note by the Holder's acceptance thereof authorizes and
directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article XII, and appoints the Trustee to act as the Holder's attorney-in-fact
for any and all such purposes. If the Trustee does not file a proper proof of
claim or proof of debt in the form required in any proceeding referred to in
Section 6.09 hereof at least 30 days before the expiration of the time to file
such claim, the Representative is hereby authorized to file an appropriate claim
for and on behalf of the Holders of the Notes.
SECTION 12.13. AMENDMENTS.
The provisions of this Article XII shall not be amended or modified in
any manner that is adverse to the holders of any Senior Debt of the Guarantors
without the written consent of such holders of Senior Debt or their
Representative.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA Section 318(c), the imposed duties shall control.
SECTION 13.02. NOTICES.
Any notice or communication by the Company or the Trustee to the other
is duly given if in writing and delivered in Person or mailed by first class
mail (registered or certified, return receipt requested), telex, telecopier or
overnight courier guaranteeing next day delivery, to the others' address:
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<PAGE> 79
If to the Company or any Guarantor:
Alliance Gaming Corporation
6601 South Bermuda Road
Las Vegas, Nevada 89119
Telecopier No.: (702) 263-5636
Attention: Corporate Secretary
If to the Trustee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-153
Telecopier No.: (212) 852-1626
Attention: Corporate Trust and Agency Division
The Company or the Trustee, by written notice to the others, may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall
be deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail or by overnight air courier guaranteeing next day delivery to its address
shown on the register kept by the Registrar. Any notice or communication shall
also be so mailed to any Person described in TIA Section 313(c), to the extent
required by the TIA. Failure to mail a notice or communication to a Holder or
any defect in it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall mail
a copy to the Trustee and each Agent at the same time.
SECTION 13.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA Section 312(b) with other
HoLders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA Section 312(c).
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<PAGE> 80
SECTION 13.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee (a) an
Officers' Certificate in form and substance reasonably satisfactory to the
Trustee (which shall include the statements set forth in Section 13.05 hereof)
stating that, in the opinion of the signers, all conditions precedent and
covenants, if any, provided for in this Indenture relating to the proposed
action have been satisfied; and (b) an Opinion of Counsel in form and substance
reasonably satisfactory to the Trustee (which shall include the statements set
forth in Section 13.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied.
SECTION 13.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA
Section 314(e) and shall include (a) a statement that the Person making such
certificate or opinion has read such covenant or condition; (b) a brief
statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such certificate or opinion are
based; (c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him or her to
express an informed opinion as to whether or not such covenant or condition has
been satisfied; and (d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.
SECTION 13.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 13.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No past, present or future director, officer, employee, incorporator or
stockholder (or other Person performing similar functions with respect to a
Person that is not a corporation) of the Company or any Guarantor, as such,
shall have any liability for any obligations of the Company or any Guarantor
under the Notes, this Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes.
SECTION 13.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE GUARANTEES.
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<PAGE> 81
SECTION 13.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 13.10. SUCCESSORS AND ASSIGNS.
All agreements of the Company and the Guarantors in this Indenture and
the Notes shall bind their successors and assigns. All agreements of the Trustee
in this Indenture shall bind its successors.
SECTION 13.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 13.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
SECTION 13.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
81
<PAGE> 82
SIGNATURES
Dated as of August 8, 1997 ALLIANCE GAMING CORPORATION
By:______________________________________
Name: Scott Schweinfurth
Title: Senior Vice President - Finance,
Chief Financial Officer and
Treasurer
Attest:
___________________________ (SEAL)
Dated as of August 8, 1997 APT GAMES, INC.
By:______________________________________
Name: Scott Schweinfurth
Title: Treasurer
Attest:
___________________________ (SEAL)
Dated as of August 8, 1997 UNITED COIN MACHINE CO.
By:______________________________________
Name: Scott Schweinfurth
Title: Treasurer
Attest:
___________________________ (SEAL)
S-1
<PAGE> 83
Dated as of August 8, 1997 PLANTATION INVESTMENTS, INC.
By:______________________________________
Name: Scott Schweinfurth
Title: Treasurer
Attest:
___________________________ (SEAL)
Dated as of August 8, 1997 ALLIANCE HOLDING COMPANY
By:______________________________________
Name: Scott Schweinfurth
Title: Treasurer
Attest:
___________________________ (SEAL)
Dated as of August 8, 1997 BALLY GAMING INTERNATIONAL, INC.
By:______________________________________
Name: Scott Schweinfurth
Title: Treasurer
Attest:
___________________________ (SEAL)
Dated as of August 8, 1997 BALLY GAMING, INC.
By:______________________________________
Name: Scott Schweinfurth
Title: Treasurer
Attest:
___________________________ (SEAL)
S-2
<PAGE> 84
Dated as of August 8, 1997 FOREIGN GAMING VENTURES, INC.
By:______________________________________
Name: Scott Schweinfurth
Title: Treasurer
Attest:
___________________________ (SEAL)
Dated as of August 8, 1997 LOUISIANA VENTURES, INC.
By:______________________________________
Name: Scott Schweinfurth
Title: Treasurer
Attest:
___________________________ (SEAL)
Dated as of August 8, 1997 UNITED GAMING RAINBOW
By:______________________________________
Name: Scott Schweinfurth
Title: Treasurer
Attest:
___________________________ (SEAL)
Dated as of August 8, 1997 NATIVE AMERICAN INVESTMENT, INC.
By:______________________________________
Name: Scott Schweinfurth
Title: Treasurer
Attest:
___________________________ (SEAL)
S-3
<PAGE> 85
Dated as of August 8, 1997 UNITED STATES TRUST COMPANY OF NEW YORK
By:______________________________________
Name: John Guiliano
Title: Vice President
Attest:
___________________________
S-4
<PAGE> 86
EXHIBIT A
(Face of Note)
No. GR-1 $150,000,000
CUSIP #01859PAF1
ALLIANCE GAMING CORPORATION
10% [SERIES A][SERIES B] SENIOR SUBORDINATED NOTES DUE 2007
Alliance Gaming Corporation promises to pay to __________ or registered assigns
the principal sum of one _____________________ Dollars on August 1, 2007.
Interest Payment Dates: February 1 and August 1
Record Dates: January 15 and July 15
Dated: ______________ Alliance Gaming Corporation
By:______________________________________
Name:
Title:
-----------------------------------------
Attest
This is one of the (SEAL)
Notes referred to in the
within-mentioned Indenture:
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By:__________________________________
Authorized Signature:
A-1
<PAGE> 87
(Back of Note)
10% [Series A] [Series B] Senior Subordinated Notes due 2007
Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except as a whole by the
Depository to a nominee of the Depository or by a nominee of the Depository to
the Depository or another nominee of the Depository or by the Depository or any
such nominee to a successor Depository or a nominee of such successor
Depository. Unless this certificate is presented by an authorized representative
of The Depository Trust Company (55 Water Street, New York, New York) ("DTC"),
to the issuer or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or such other
name as may be requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or such other entity as may be requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.(1)
THE SECURITY EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY
NOT BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN OF RULE 144A UNDER THE SECURITIES
ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, OUTSIDE THE
UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 904 UNDER THE SECURITIES ACT OR IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION
OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
- ----------
(1) This paragraph should be included only if the Note is issued in global form.
A-2
<PAGE> 88
REQUIRED TO, NOTIFY ANY PURCHASER OF THE NOTE EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE.
Capitalized terms used herein shall have the meanings assigned to them
in this Indenture referred to below unless otherwise indicated.
1. INTEREST. Alliance Gaming Corporation, a Nevada corporation (the
"Company"), promises to pay interest on the principal amount of this Note at 10%
per annum from August 8, 1997 until maturity and shall pay the Liquidated
Damages payable pursuant to Section 5 of the Registration Rights Agreement
referred to below. The Company will pay interest and Liquidated Damages
semi-annually on February 1 and August 1 of each year, or if any such day is not
a Business Day, on the next succeeding Business Day (each an "Interest Payment
Date"). Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
issuance; provided that if there is no existing Default in the payment of
interest, and if this Note is authenticated between a record date referred to on
the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be February 1, 1998. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time at a
rate that is 1% per annum in excess of the rate then in effect; it shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time at the same
rate to the extent lawful. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the January 15 or July
15 next preceding the Interest Payment Date, even if such Notes are cancelled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of this Indenture with respect to defaulted interest.
The Notes will be payable as to principal, premium, interest and Liquidated
Damages at the office or agency of the Company maintained for such purpose
within or without the City and State of New York, or, at the option of the
Company, payment of interest and Liquidated Damages may be made by check mailed
to the Holders at their addresses set forth in the register of Holders, and
provided that payment by wire transfer of immediately available funds will be
required with respect to principal of and interest, premium and Liquidated
Damages on, all Global Notes and all other Notes the Holders of which shall have
provided wire transfer instructions to the Company or the Paying Agent. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, United States Trust
Company of New York, the Trustee under the Indenture, will act as Paying Agent
and Registrar. The Company may change any Paying Agent or Registrar without
notice to any Holder. The Company or any of its Subsidiaries may, subject to
certain exceptions, act in any such capacity.
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<PAGE> 89
4. INDENTURE. The Company issued the Notes under an Indenture dated
as of August 8, 1997 (the "Indenture") between the Company, the Guarantors and
the Trustee. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are
subject to all such terms, and Holders are referred to this Indenture and such
Act for a statement of such terms. The Notes are unsecured senior subordinated
obligations of the Company limited to $150,000,000 in aggregate principal
amount.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this
Paragraph 5, the Company shall not have the option to redeem the Notes prior to
August 1, 2002. Thereafter, the Company shall have the option to redeem the
Notes, in whole or in part, upon not less than 30 nor more than 60 days' notice,
at the redemption prices (expressed as percentages of principal amount) set
forth below plus accrued and unpaid interest thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on August
1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2002..................................................... 105.000%
2003..................................................... 103.333%
2004..................................................... 101.667%
2005 and thereafter...................................... 100.000%
</TABLE>
(b) Notwithstanding the provisions of subparagraph (a) of
this Paragraph 5, at any time prior to August 9, 2000, the Company may redeem up
to an aggregate of 33 1/3% of the original aggregate principal amount of the
Notes at a redemption price equal to 110% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the
redemption date, with the net cash proceeds of one or more Equity Offerings;
provided that at least 66 2/3% of the original aggregate principal amount of the
Notes remain outstanding immediately after the occurrence of such redemption;
and provided, further, that such redemption shall occur within 45 days of the
date of the closing of each such Equity Offering.
(c) Notwithstanding any other provisions hereof, if any
Gaming Authority requires that a Holder or beneficial owner of Notes must be
licensed, qualified or found suitable under any applicable gaming law and such
Holder or beneficial owner fails to apply for a license, qualification or a
finding of suitability within 30 days after being requested to do so by the
Gaming Authority (or such lesser period that may be required by such Gaming
Authority), or if such Holder or such beneficial owner is not so licensed,
qualified or found suitable, the Company will have the right, at its option, (i)
to require such Holder or beneficial owner to dispose of such Holder's or
beneficial owner's Notes within 30 days of receipt of such notice of such
finding by the applicable Gaming Authority or such earlier date as may be
ordered by such Gaming Authority or (ii) to redeem the Notes of such Holder or
beneficial owner at the lesser of (a) the price at which such Holder or
beneficial owner acquired such Notes, without
A-4
<PAGE> 90
accrued interest or Liquidated Damages, if any, unless the payment of such
interest or Liquidated Damages, if any, is permitted by the applicable Gaming
Authority, in which case such interest and Liquidated Damages, in any, shall be
paid through the date of redemption, (b) the fair market value of such Notes on
such redemption date and (c) the principal amount of such Notes without accrued
interest or Liquidated Damages, if any, thereon, unless the payment of such
interest or Liquidated Damages, if any, is permitted by the applicable Gaming
Authority, in which case such interest and Liquidated Damages, if any, shall be
paid through the date of redemption. The Holder or beneficial owner of Notes
applying for a license, qualification or a finding of suitability must pay all
costs of the licensure or investigation for such qualification or finding of
suitability. The Company is not required to pay or reimburse any Holder or
beneficial owner of Notes who is required to apply for such license,
qualification or finding of suitability for the costs of the licensure or
investigation for such qualification or finding of suitability.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be
required, subject to the provisions of Section 4.15 of the Indenture, to make an
offer (a "Change of Control Offer") to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of purchase
(the "Change of Control Payment"). Within 10 days following any Change of
Control, the Company shall, subject to the provisions of Section 4.15 of the
Indenture, mail a notice to each Holder setting forth the procedures governing
the Change of Control Offer as required by the Indenture.
(b) When the aggregate amount of Excess Proceeds exceeds
$10.0 million, the Company shall commence an offer to all Holders of Notes (as
"Asset Sale Offer") pursuant to Section 4.10 of the Indenture to purchase the
maximum principal amount of Notes that may be purchased out of the Excess
Proceeds at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the date of purchase, in accordance with the procedures set forth in
the Indenture. To the extent that the aggregate amount of Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company
(or any Restricted Subsidiary) may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis. Holders of Notes that are the
subject of an offer to purchase will receive an Asset Sale Offer from the
Company prior to any related purchase date and may elect to have such Notes
purchased by completing the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes.
A-5
<PAGE> 91
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. SUBORDINATION. The payment of the principal of, interest on or
any other amounts due on the Notes is subordinated in right of payment to all
existing and future Senior Debt of the Company, as described in the Indenture.
Each holder, by accepting a Note, agrees to such subordination and authorizes
and directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided and appoints the Trustee
as its attorney-in-fact for such purpose.
10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in this Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by this Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed or during the period between a record date and
the corresponding Interest Payment Date.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the then outstanding
Notes, and any existing default or compliance with any provision of this
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes. Without the consent
of any Holder of a Note, this Indenture or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of the Notes
in case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under this Indenture of any such Holder, or to
comply with the requirements of the SEC in order to effect or maintain the
qualification of this Indenture under the Trust Indenture Act.
13. DEFAULTS AND REMEDIES. Events of Default include: (i) default
for 30 days in the payment when due of interest or Liquidated Damages on the
Notes; (ii) default in payment when due of principal of or premium, if any, on
the Notes when the same becomes due and payable at maturity, upon redemption
(including in connection with an offer to purchase) or
A-6
<PAGE> 92
otherwise, (iii) failure by the Company to comply with Section 4.10 of the
Indenture; (iv) failure by the Company for 60 days after written notice to the
Company by the Trustee or the Holders of at least 25% in principal amount of the
Notes then outstanding to comply with any other covenant, representation,
warranty or other agreement in the Indenture or the Notes; (v) default under
certain other agreements relating to Indebtedness of the Company which default
results in the acceleration of such Indebtedness prior to its express maturity
and the principal amount of all Indebtedness the maturity of which has been so
accelerated aggregates $10.0 million or more; (vi) certain final judgments for
the payment of money that remain undischarged for a period of 60 days; (vii)
certain events of bankruptcy or insolvency with respect to the Company or any of
its Significant Subsidiaries; (viii) any Subsidiary Guarantee shall be held in
any judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect; and (ix) any Gaming License of the
Company or any of its Restricted Subsidiaries is revoked, terminated or
suspended or otherwise ceases to be effective, resulting in the cessation or
suspension, for a period of more than 90 days, of operations of any portion of
the business of the Company or any of its Restricted Subsidiaries that accounted
for more than 10% of the Consolidated Cash Flow of the Company for the period of
the four consecutive fiscal quarters most recently ended for which internal
financial statements are available, provided that any voluntary relinquishment
of a Gaming License if such relinquishment is, in the reasonable good faith
judgment of the Board of Directors of the Company, evidenced by a resolution of
such Board, both desirable in the conduct of the business of the Company and its
Restricted Subsidiaries, taken as a whole, and not disadvantageous in any
material respect to the Holders of the Notes shall not constitute an Event of
Default hereunder. If any Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the then outstanding Notes
may declare all the Notes to be due and payable. Upon such a declaration, such
principal and interest shall be due and payable immediately; provided that if
upon such declaration there are any amounts outstanding under the New Credit
Facility and the amounts thereunder have not been accelerated, such principal
and interest shall be due and payable upon the earlier of the time such amounts
are accelerated or five Business Days after the receipt by the Company and the
Representative under the New Credit Facility of such declaration.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency with respect to the Company, all
outstanding Notes will become due and payable without further action or notice.
Holders may not enforce the Indenture or the Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Notes may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of the Notes notice of
any continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest. The Company is required to deliver to
the Trustee annually a statement regarding compliance with the Indenture, and
the Company is required upon becoming aware of any Default or Event of Default
to deliver to the Trustee a statement specifying such Default or Event of
Default.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
A-7
<PAGE> 93
15. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator or stockholder (or other Person performing
similar functions with respect to a Person that is not a corporation) of the
Company, as such, shall have any liability for any obligations of the Company
under the Notes or this Indenture or for any claim based on, in respect of, or
by reason of, such obligations or their creation. Each Holder by accepting a
Note waives and releases all such liability. The waiver and release are part of
the consideration for the issuance of the Notes.
16. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES.
In addition to the rights provided to Holders of Notes under this Indenture,
Holders of Transferred Restricted Securities shall have all the rights set forth
in the A/B Exchange Registration Rights Agreement dated as of August 8, 1997,
between the Company and the parties named on the signature pages thereof (the
"Registration Rights Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of this Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Alliance Gaming Corporation
6601 South Bermuda Road
Las Vegas, Nevada 89119
Attention: Secretary
A-8
<PAGE> 94
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
________________________________________________________________________________
Date:____________ Your Signature:_____________________________________________
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee:_____________________________________
(Signature must be guaranteed)
A-9
<PAGE> 95
OPTION OF HOLDER TO ELECT PURCHASE
If you want to have this Note purchased by the Company pursuant to
Section 4.10 or 4.15 of this Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.15
If you want to have only part of the Note purchased by the Company
pursuant to Section 4.10 or Section 4.15 of this Indenture, state the amount you
elect to have purchased: $___________
Date:____________ Your Signature:_____________________________________________
(Sign exactly as your name appears on the face of this Note)
Tax Identification No.:____________________________
Signature Guarantee:_____________________________________
(Signature must be guaranteed)
A-10
<PAGE> 96
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTE(2)
The following exchanges of a part of this Global Note for Definitive Notes have
been made:
<TABLE>
<CAPTION>
Principal amount of Signature of
Amount of decrease Amount of increase this Global Note authorized officer
in principal amount in principal amount following such of Trustee or Note
Date of Exchange of this Global Note of this Global Note decrease(or increase) Custodian
---------------- ------------------- ------------------- --------------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
- ----------
(2) This should be included only if the Note is issued in global form.
A-11
<PAGE> 97
[FORM OF NOTATION ON NOTE RELATING TO GUARANTEE]
SUBORDINATED GUARANTEE
For good and valuable consideration, the adequacy and receipt of which
are hereby acknowledged, the Guarantors (as defined in the Indenture (the
"Indenture") referred to in the Note upon which this notation is endorsed and
each hereinafter referred to as a "Guarantor," which term includes any successor
person under the Indenture) have, jointly and severally, unconditionally
guaranteed on a senior subordinated unsecured basis (such guarantee by each
Guarantor being referred to herein as the "Guarantee") (i) the due and punctual
payment of the principal of and interest and Liquidated Damages, if any, on the
Notes, whether at maturity, by acceleration or otherwise, the due and punctual
payment of interest on the overdue principal and interest and Liquidated
Damages, if any, on the Notes, to the extent lawful, and the due and punctual
performance of all other obligations of the Company to the Holders or the
Trustee all in accordance with the terms set forth in Articles XI and XII of the
Indenture and (ii) in case of any extension of time of payment or renewal of any
Notes or any of such other obligations, in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
The obligations of each Guarantor to the Holders of Notes and to the
Trustee pursuant to the Guarantee and the Indenture are expressly set forth, and
are senior subordinated unsecured obligations, of each such Guarantor to the
extent and in the manner provided in Section 11.02 and Article XII of the
Indenture and may be released under certain circumstances. Reference is hereby
made to such Indenture for the precise terms of the Guarantee therein made.
No past, present or future director, officer, employee, incorporator or
stockholder (or other Persons performing similar functions with respect to a
Person that is not a corporation) of any Guarantor, as such, shall have any
liability under the Guarantee by reason of his or its status as such
stockholder, officer, director or incorporator.
The Guarantee shall not be valid or obligatory for any purpose until the
certificate of authentication on the Notes upon which the Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
GUARANTORS:
APT GAMES, INC.
By:_____________________________________
Name: Scott Schweinfurth
Title: Treasurer
A-12
<PAGE> 98
UNITED COIN MACHINE CO.
By:_____________________________________
Name: Scott Schweinfurth
Title: Treasurer
PLANTATION INVESTMENTS, INC.
By:_____________________________________
Name: Scott Schweinfurth
Title: Treasurer
ALLIANCE HOLDING COMPANY
By:_____________________________________
Name: Scott Schweinfurth
Title: Treasurer
BALLY GAMING INTERNATIONAL, INC.
By:_____________________________________
Name: Scott Schweinfurth
Title: Treasurer
BALLY GAMING, INC.
By:_____________________________________
Name: Scott Schweinfurth
Title: Treasurer
A-13
<PAGE> 99
FOREIGN GAMING VENTURES, INC.
By:_____________________________________
Name: Scott Schweinfurth
Title: Treasurer
LOUISIANA VENTURES, INC.
By:_____________________________________
Name: Scott Schweinfurth
Title: Treasurer
UNITED GAMING RAINBOW
By:_____________________________________
Name: Scott Schweinfurth
Title: Treasurer
NATIVE AMERICAN INVESTMENT, INC.
By:_____________________________________
Name: Scott Schweinfurth
Title: Treasurer
A-14
<PAGE> 100
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF NOTES
Re: 10% Senior Subordinated Notes due 2007 of Alliance Gaming Corporation.
This Certificate relates to $_____ principal amount of Notes held in
* ________ book-entry or *_______ definitive form by ________________ (the
"Transferor").
The Transferor*:
[ ] has requested the Trustee by written order to deliver in exchange for
its beneficial interest in the Global Note held by the Depository a Note or
Notes in definitive, registered form of authorized denominations in an aggregate
principal amount equal to its beneficial interest in such Global Note (or the
portion thereof indicated above); or
[ ] has requested the Trustee by written order to exchange or
register the transfer of a Note or Notes.
In connection with such request and in respect of each such Note, the
Transferor does hereby certify that Transferor is familiar with this Indenture
relating to the above captioned Notes and as provided in Section 2.06 of such
Indenture, the transfer of this Note does not require registration under the
Securities Act (as defined below) because:*
[ ] Such Note is being acquired for the Transferor's own account without
transfer (in satisfaction of Section 2.06(a)(ii)(A) or Section 2.06(d)(ii)(A) of
this Indenture).
[ ] Such Note is being transferred to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act")) in reliance on Rule 144A (in satisfaction of Section
2.06(a)(ii)(B), Section 2.06(b)(A) or Section 2.06(d)(ii) (B) of this Indenture)
or outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act (in satisfaction of Section
2.06(a)(ii)(B) or Section 2.06(d)(ii)(B) of this Indenture.)
- ----------
*Check applicable box.
B-1
<PAGE> 101
[ ] Such Note is being transferred in accordance with Rule 144 under the
Securities Act, or pursuant to an effective registration statement under the
Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or Section
2.06(d)(ii)(B) of this Indenture).
[ ] Such Note is being transferred in reliance on and in compliance with an
exemption from the registration requirements of the Securities Act, other than
Rule 144A, 144 or Rule 904 under the Securities Act. An Opinion of Counsel to
the effect that such transfer does not require registration under the Securities
Act accompanies this Certificate (in satisfaction of Section 2.06(a)(ii)(C) or
Section 2.06(d)(ii)(C) of this Indenture).
-----------------------------------------
[INSERT NAME OF TRANSFEROR]
By:______________________________________
Date:_______________________________
- ----------
*Check applicable box.
B-2
<PAGE> 102
================================================================================
ALLIANCE GAMING CORPORATION
SERIES A AND SERIES B
10% SENIOR SUBORDINATED NOTES DUE 2007
-----------------
INDENTURE
Dated as of August 8, 1997
-----------------
UNITED STATES TRUST COMPANY OF NEW YORK
-----------------
================================================================================
<PAGE> 103
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
<S> <C> <C>
310 (a)(1) .................................................... 7.10
(a)(2)..................................................... 7.10
(a)(3) .................................................... N.A.
(a)(4)..................................................... N.A.
(a)(5)..................................................... 7.10
(b) ....................................................... 7.10
(c) ....................................................... N.A.
311 (a) ....................................................... 7.11
(b) ....................................................... 7.11
(c) ....................................................... N.A.
312 (a)........................................................ 2.05
(b)........................................................ 11.03
(c) ....................................................... 11.03
313 (a) ....................................................... 7.06
(b)(1) .................................................... 10.03
(b)(2) .................................................... 7.07
(c) ....................................................... 7.06;11.02
(d)........................................................ 7.06
314 (a) ....................................................... 4.03;11.02
(b) ....................................................... 10.02
(c)(1) .................................................... 11.04
(c)(2) .................................................... 11.04
(c)(3) .................................................... N.A.
(d)........................................................ 10.03, 10.04, 10.05
(e) ...................................................... 11.05
(f)........................................................ N.A.
315 (a)........................................................ 7.01
(b)........................................................ 7.05,11.02
(c) ...................................................... 7.01
(d)........................................................ 7.01
(e)........................................................ 6.11
316 (a)(last sentence) ........................................ 2.09
(a)(1)(A).................................................. 6.05
(a)(1)(B) ................................................. 6.04
(a)(2) .................................................... N.A.
(b) ....................................................... 6.07
(c) ....................................................... 2.12
317 (a)(1) .................................................... 6.08
(a)(2)..................................................... 6.09
(b) ....................................................... 2.04
318 (a)........................................................ 11.01
(b)........................................................ N.A.
(c)........................................................ 11.01
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of this Indenture.
<PAGE> 104
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions............................................ 1
Section 1.02. Other Definitions...................................... 16
Section 1.03. Incorporation by Reference of Trust Indenture Act...... 17
Section 1.04. Rules of Construction.................................. 17
ARTICLE II
THE NOTES
Section 2.01. Form and Dating........................................ 18
Section 2.02. Execution and Authentication........................... 19
Section 2.03. Registrar and Paying Agent............................. 19
Section 2.04. Paying Agent to Hold Money in Trust.................... 20
Section 2.05. Holder Lists........................................... 20
Section 2.06. Transfer and Exchange.................................. 20
Section 2.07. Replacement Notes...................................... 25
Section 2.08. Outstanding Notes...................................... 26
Section 2.09. Treasury Notes......................................... 26
Section 2.10. Temporary Notes........................................ 26
Section 2.11. Cancellation........................................... 27
Section 2.12. Defaulted Interest..................................... 27
ARTICLE III
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee..................................... 27
Section 3.02. Selection of Notes to Be Redeemed...................... 28
Section 3.03. Notice of Redemption................................... 28
Section 3.04. Effect of Notice of Redemption......................... 29
Section 3.05. Deposit of Redemption Price............................ 29
Section 3.06. Notes Redeemed in Part................................. 29
Section 3.07. Optional Redemption.................................... 30
Section 3.08. Mandatory Redemption................................... 31
Section 3.09. Offer to Purchase by Application of Excess Proceeds.... 31
ARTICLE IV
COVENANTS
Section 4.01. Payment of Notes....................................... 32
Section 4.02. Maintenance of Office or Agency........................ 33
Section 4.03. Reports................................................ 33
Section 4.04. Compliance Certificate................................. 34
Section 4.05. Taxes.................................................. 35
Section 4.06. Stay, Extension and Usury Laws......................... 35
Section 4.07. Restricted Payments.................................... 35
Section 4.08. Dividend and Other Payment Restrictions
Affecting Subsidiaries................................. 38
Section 4.09. Incurrence of Indebtedness and Issuance of
Preferred Stock........................................ 39
Section 4.10. Asset Sales............................................ 41
Section 4.11. Transactions with Affiliates........................... 42
Section 4.12. Limitation on Issuances and Sales of
Capital Stock of Wholly Owned Subsidiaries............. 43
</TABLE>
i
<PAGE> 105
<TABLE>
<S> <C> <C>
Section 4.13. Line of Business....................................... 43
Section 4.14. Corporate Existence.................................... 43
Section 4.15. Offer to Repurchase Upon Change of Control............. 44
Section 4.16. No Senior Subordinated Debt............................ 45
Section 4.17. Limitation on Issuances of Guarantees of
Indebtedness........................................... 45
Section 4.18. Redemption of Series B Preferred Stock................. 46
Section 4.19. Designation of an Unrestricted Subsidiary as a
Restricted Subsidiary.................................. 46
Section 4.20. Designation of a Subsidiary as an Unrestricted
Subsidiary............................................. 46
Section 4.21. Limitation on Status as Investment Company............. 47
ARTICLE V
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets............... 47
Section 5.02. Successor Corporation Substituted...................... 48
ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.01. Events of Default...................................... 48
Section 6.02. Acceleration........................................... 50
Section 6.03. Other Remedies......................................... 50
Section 6.04. Waiver of Past Defaults................................ 50
Section 6.05. Control by Majority.................................... 51
Section 6.06. Limitation on Suits.................................... 51
Section 6.07. Rights of Holders of Notes to Receive Payment.......... 51
Section 6.08. Collection Suit by Trustee............................. 52
Section 6.09. Trustee May File Proofs of Claim....................... 52
Section 6.10. Priorities............................................. 52
Section 6.11. Undertaking for Costs.................................. 53
ARTICLE VII
TRUSTEE
Section 7.01. Duties of Trustee...................................... 53
Section 7.02. Rights of Trustee...................................... 54
Section 7.03. Individual Rights of Trustee........................... 55
Section 7.04. Trustee's Disclaimer................................... 55
Section 7.05. Notice of Defaults..................................... 55
Section 7.06. Reports by Trustee to Holders of the Notes............. 56
Section 7.07. Compensation and Indemnity............................. 56
Section 7.08. Replacement of Trustee................................. 57
Section 7.09. Successor Trustee by Merger, etc....................... 57
Section 7.10. Eligibility; Disqualification.......................... 58
Section 7.11. Preferential Collection of Claims Against
Company................................................ 58
ARTICLE VIII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance............................................. 58
Section 8.02. Legal Defeasance and Discharge......................... 58
Section 8.03. Covenant Defeasance.................................... 59
Section 8.04. Conditions to Legal or Covenant Defeasance............. 59
Section 8.05. Deposited Money and Government Securities to
be Held in Trust; Other Miscellaneous Provisions....... 60
Section 8.06. Repayment to Company................................... 61
Section 8.07. Reinstatement.......................................... 61
</TABLE>
ii
<PAGE> 106
<TABLE>
<S> <C> <C>
Section 8.08. Subordination.......................................... 62
ARTICLE IX
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.................... 62
Section 9.02. With Consent of Holders of Notes....................... 62
Section 9.03. Compliance with Trust Indenture Act.................... 64
Section 9.04. Revocation and Effect of Consents...................... 64
Section 9.05. Notation on or Exchange of Notes....................... 64
Section 9.06. Trustee to Sign Amendments, etc........................ 64
Section 9.07. Subordination.......................................... 65
ARTICLE X
SUBORDINATION
Section 10.01. Agreement to Subordinate............................... 66
Section 10.02. Liquidation; Dissolution; Bankruptcy................... 66
Section 10.03. Default on Senior Debt................................. 66
Section 10.04. Acceleration of Notes.................................. 67
Section 10.05. When Distribution Must Be Paid Over.................... 67
Section 10.06. Notice by Company...................................... 68
Section 10.07. Subrogation............................................ 68
Section 10.09. Subordination May Not Be Impaired by Acts of
Omissions of the Company............................... 69
Section 10.10. Distribution or Notice to Representative............... 69
Section 10.11. Rights of Trustee and Paying Agent..................... 70
Section 10.12. Authorization to Effect Subordination.................. 70
Section 10.13. Amendments............................................. 70
ARTICLE XI
GUARANTEES
Section 11.01. Unconditional Guarantee................................ 70
Section 11.02. Subordination of Guarantee............................. 71
Section 11.03. Severability........................................... 72
Section 11.04. Release of a Guarantor................................. 72
Section 11.05. Limitation of Guarantor's Liability.................... 72
Section 11.06. Guarantors May Consolidate, etc., on Certain
Terms.................................................. 72
Section 11.07. Contribution........................................... 73
Section 11.08. Waiver of Subrogation.................................. 73
Section 11.09. Execution of Guarantee................................. 73
Section 11.10. Additional Subsidiary Guarantees....................... 74
ARTICLE XII
SUBORDINATION OF GUARANTEES
Section 12.01. Agreement to Subordinate............................... 74
Section 12.02. Liquidation; Dissolution; Bankruptcy................... 75
Section 12.03. Default on Senior Debt................................. 75
Section 12.04. Acceleration of Notes.................................. 76
Section 12.05. When Distribution Must Be Paid Over.................... 76
Section 12.06. Notice by Guarantors................................... 76
Section 12.07. Subrogation............................................ 77
Section 12.09. Subordination Rights Not Impaired by Acts or
Omissions of the Guarantors ........................... 77
Section 12.10. Distribution or Notice to Representative............... 78
Section 12.11. Rights of Trustee and Paying Agent..................... 78
</TABLE>
iii
<PAGE> 107
<TABLE>
<S> <C> <C>
Section 12.12. Authorization to Effect Subordination.................. 78
Section 12.13. Amendments............................................. 79
ARTICLE XIII
MISCELLANEOUS
Section 13.01. Trust Indenture Act Controls........................... 79
Section 13.02. Notices................................................ 79
Section 13.03. Communication by Holders of Notes with Other
Holders of Notes....................................... 80
Section 13.04. Certificate and Opinion as to Conditions
Precedent.............................................. 80
Section 13.05. Statements Required in Certificate or Opinion.......... 80
Section 13.06. Rules by Trustee and Agents............................ 81
Section 13.07. No Personal Liability of Directors, Officers,
Employees and Stockholders............................. 81
Section 13.08. Governing Law.......................................... 81
Section 13.09. No Adverse Interpretation of Other Agreements.......... 81
Section 13.10. Successors and Assigns................................. 81
Section 13.11. Severability........................................... 81
Section 13.12. Counterpart Originals.................................. 82
Section 13.13. Table of Contents, Headings, etc....................... 82
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B CERTIFICATE OF TRANSFEROR
</TABLE>
iv
<PAGE> 1
EXHIBIT 4.3
================================================================================
CREDIT AGREEMENT
among
ALLIANCE GAMING CORPORATION,
BALLY WULFF VERTRIEBS GMBH,
BALLY WULFF AUTOMATEN GMBH,
VARIOUS LENDERS,
and
CREDIT SUISSE FIRST BOSTON,
as ADMINISTRATIVE AGENT
----------------------------------
Dated as of August 8, 1997
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SECTION 1. Amount and Terms of Credit................................................................ 1
1.01 The Commitments........................................................................... 1
1.02 Minimum Amount of Each Borrowing.......................................................... 11
1.03 Notice of Borrowing....................................................................... 11
1.04 Disbursement of Funds..................................................................... 12
1.05 Notes..................................................................................... 13
1.06 Conversions............................................................................... 18
1.07 Pro Rata Borrowings....................................................................... 19
1.08 Interest.................................................................................. 19
1.09 Interest Periods.......................................................................... 21
1.10 Increased Costs, Illegality, etc.......................................................... 22
1.11 Compensation.............................................................................. 26
1.12 Lending Offices; Changes Thereto.......................................................... 26
1.13 Replacement of Lenders.................................................................... 27
SECTION 2. Letters of Credit......................................................................... 29
2.01 Letters of Credit......................................................................... 29
2.02 Maximum Letter of Credit Outstandings; Final
Maturities............................................................................. 31
2.03 Letter of Credit Requests; Notices of Issuance;
Minimum Stated Amount.................................................................. 32
2.04 Letter of Credit Participations........................................................... 33
2.05 Agreement to Repay Letter of Credit Drawings.............................................. 36
2.06 Increased Costs........................................................................... 37
SECTION 3. Commitment Commission; Fees; Reductions of
Commitment............................................................................. 38
3.01 Fees...................................................................................... 38
3.02 Voluntary Termination of Unutilized Commitments........................................... 39
3.03 Mandatory Reduction of Commitments........................................................ 40
SECTION 4. Prepayments; Payments; Taxes.............................................................. 43
4.01 Voluntary Prepayments..................................................................... 43
4.02 Mandatory Repayments and Commitment Reductions............................................ 44
4.03 Method and Place of Payment............................................................... 55
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4.04 Net Payments.............................................................................. 56
4.05 Waivable Repayments....................................................................... 59
SECTION 5A. Conditions Precedent to Initial Credit Events............................................. 61
5A.01 Execution of Agreement; Notes............................................................. 61
5A.02 Opinions of Counsel....................................................................... 61
5A.03 Corporate Documents; Proceedings; etc..................................................... 62
5A.04 Fees, etc................................................................................. 62
5A.05 Issuance of New Senior Subordinated Notes................................................. 62
5A.06 Existing Senior Secured Notes Tender Offer/Consent
Solicitation; etc...................................................................... 63
5A.07 Notice of Existing PIK Preferred Stock Redemption......................................... 63
5A.08 Indebtedness to be Refinanced............................................................. 64
5A.09 Outstanding Indebtedness and Preferred Stock.............................................. 65
5A.10 Adverse Change, etc....................................................................... 65
5A.11 Litigation................................................................................ 65
5A.12 Subsidiary Guaranties..................................................................... 66
5A.13 U.S. Pledge Agreement..................................................................... 66
5A.14 U.S. Security Agreement................................................................... 66
5A.15 German Security Documents................................................................. 67
5A.16 Mortgages; Title Insurance; Survey........................................................ 68
5A.17 Pro Forma Balance Sheet................................................................... 69
5A.18 Borrowing Base Certificates............................................................... 69
5A.19 Solvency Certificate; Environmental Analyses; Insurance
Analyses............................................................................... 69
SECTION 5B. Conditions Precedent to Initial Delayed Draw Term Loans................................... 70
5B.01 Occurrence of Initial Borrowing Date...................................................... 70
5B.02 Purchase of Rainbow Royalty Payments; Rainbow
Mortgage Debt.......................................................................... 70
5B.03 Execution of Guaranty and Security Documents by RCVP...................................... 70
5B.04 Opinions of Counsel....................................................................... 71
SECTION 6. Conditions Precedent to All Credit Events................................................. 71
6.01 No Default; Representations and Warranties................................................ 71
6.02 Notice of Borrowing; Letter of Credit Request............................................. 71
6.03 Regulations U and G..................................................................................... 71
SECTION 7. Representations, Warranties and Agreements................................................ 72
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7.01 Corporate and Other Status................................................................ 72
7.02 Corporate and Other Power and Authority................................................... 73
7.03 No Violation.............................................................................. 73
7.04 Governmental Approvals.................................................................... 73
7.05 Financial Statements; Financial Condition; Undisclosed
Liabilities; Projections; etc.......................................................... 73
7.06 Litigation................................................................................ 75
7.07 True and Complete Disclosure.............................................................. 75
7.08 Use of Proceeds; Margin Regulations....................................................... 76
7.09 Tax Returns and Payments.................................................................. 76
7.10 Compliance with ERISA..................................................................... 77
7.11 The Security Documents.................................................................... 79
7.12 Representations and Warranties in Other Documents......................................... 81
7.13 Properties................................................................................ 81
7.14 Capitalization............................................................................ 81
7.15 Subsidiaries.............................................................................. 81
7.16 Compliance with Statutes, etc............................................................. 82
7.17 Investment Company Act.................................................................... 82
7.18 Public Utility Holding Company Act........................................................ 82
7.19 Environmental Matters..................................................................... 82
7.20 Labor Relations........................................................................... 83
7.21 Patents, Licenses, Franchises and Formulas................................................ 84
7.22 Indebtedness.............................................................................. 84
7.23 Transaction............................................................................... 84
7.24 Existing Senior Secured Notes............................................................. 84
7.25 Specified Inactive Subsidiaries and Specified Non-
Material Subsidiaries.................................................................. 85
7.26 Existing Senior Secured Notes Collateral.................................................. 85
7.27 Margin Stock.............................................................................. 85
SECTION 8. Affirmative Covenants..................................................................... 85
8.01 Information Covenants..................................................................... 86
8.02 Books, Records and Inspections............................................................ 91
8.03 Maintenance of Property; Insurance........................................................ 91
8.04 Corporate Franchises...................................................................... 92
8.05 Compliance with Statutes, etc............................................................. 92
8.06 Compliance with Environmental Laws........................................................ 93
8.07 ERISA..................................................................................... 94
8.08 End of Fiscal Years; Fiscal Quarters...................................................... 95
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8.09 Obtaining Approvals....................................................................... 95
8.10 Payment of Taxes.......................................................................... 96
8.11 Additional Security; Further Assurances; etc.............................................. 96
8.12 Foreign Subsidiaries Security............................................................. 98
8.13 Permitted Acquisitions.................................................................... 99
8.14 Actions With Respect to Certain Subsidiaries..............................................100
8.15 Margin Stock..............................................................................102
8.16 Existing Senior Secured Notes Collateral..................................................103
8.17 Covenant Defeasance of Existing Senior Secured Notes......................................103
SECTION 9. Negative Covenants........................................................................104
9.01 Liens.....................................................................................104
9.02 Consolidation, Merger, Purchase or Sale of Assets, etc....................................107
9.03 Restricted Payments.......................................................................111
9.04 Indebtedness..............................................................................112
9.05 Advances, Investments and Loans...........................................................114
9.06 Transactions with Affiliates..............................................................119
9.07 Capital Expenditures......................................................................120
9.08 Consolidated Fixed Charge Coverage Ratio..................................................121
9.09 Consolidated Interest Coverage Ratio......................................................122
9.10 Maximum Leverage Ratio....................................................................122
9.11 Minimum Consolidated EBITDA...............................................................123
9.12 Limitation on Voluntary Payments and Modifications of
Indebtedness; Modifications of Certificate of
Incorporation, By-Laws and Certain Other
Agreements; etc........................................................................123
9.13 Limitation on Certain Restrictions on Subsidiaries........................................124
9.14 Limitation on Issuance of Capital Stock...................................................124
9.15 Business..................................................................................125
9.16 Limitation on Creation of Subsidiaries....................................................125
SECTION 10. Events of Default.........................................................................126
10.01 Payments..................................................................................126
10.02 Representations, etc......................................................................126
10.03 Covenants.................................................................................126
10.04 Default Under Other Agreements............................................................127
10.05 Bankruptcy, etc...........................................................................127
10.06 ERISA.....................................................................................128
10.07 Security Documents........................................................................129
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10.08 Guaranties................................................................................129
10.09 Judgments.................................................................................129
10.10 Change of Control.........................................................................129
10.11 Gaming Licenses...........................................................................129
10.12 Bailee Agreement..........................................................................129
10.13 Subsidiary Stock Restrictions.............................................................130
SECTION 11. Definitions and Accounting Terms..........................................................131
11.01 Defined Terms.............................................................................131
SECTION 12. The Administrative Agent..................................................................187
12.01 Appointment...............................................................................187
12.02 Nature of Duties..........................................................................187
12.03 Lack of Reliance on the Administrative Agent..............................................188
12.04 Certain Rights of the Administrative Agent................................................188
12.05 Reliance..................................................................................188
12.06 Indemnification...........................................................................189
12.07 The Administrative Agent in its Individual Capacity.......................................189
12.08 Holders...................................................................................189
12.09 Resignation by the Administrative Agent...................................................189
SECTION 13. Miscellaneous.............................................................................190
13.01 Payment of Expenses, etc..................................................................190
13.02 Right of Setoff...........................................................................192
13.03 Notices...................................................................................192
13.04 Benefit of Agreement; Assignments; Participations.........................................192
13.05 No Waiver; Remedies Cumulative............................................................197
13.06 Payments Pro Rata.........................................................................197
13.07 Calculations; Computations................................................................198
13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL....................199
13.09 Counterparts..............................................................................200
13.10 Effectiveness.............................................................................200
13.11 Headings Descriptive......................................................................201
13.12 Amendment or Waiver; etc..................................................................201
13.13 Survival..................................................................................202
13.14 Domicile of Loans.........................................................................203
13.15 Register..................................................................................203
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13.16 Judgment Currency.........................................................................204
13.17 Confidentiality...........................................................................204
13.18 Applicable Gaming Laws; Requisite Gaming Approvals........................................205
13.19 Gaming Authorities........................................................................208
13.20 Nevada Gaming Collateral..................................................................208
13.21 Limitation on Additional Amounts, etc.....................................................208
13.22 Power of Attorney.........................................................................209
13.23 Post Closing Actions......................................................................209
13.24 Specific Provisions Regarding German Borrowers............................................211
13.25 Specific Provisions Regarding BGI Chattel Paper...........................................211
13.26 Special Provisions Regarding United Coin Machine Notes....................................212
13.27 Override Provisions Regarding Margin Stock................................................212
SECTION 14. Parent Guaranty...........................................................................212
14.01 The Parent Guaranty.......................................................................212
14.02 Bankruptcy................................................................................213
14.03 Nature of Liability.......................................................................213
14.04 Independent Obligation....................................................................214
14.05 Authorization.............................................................................214
14.06 Reliance..................................................................................215
14.07 Subordination.............................................................................215
14.08 Waiver....................................................................................216
14.09 Limitation on Enforcement.................................................................217
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SCHEDULE I-A Commitments
SCHEDULE I-B German Revolving Loan Sub-Commitments
SCHEDULE II Lender Addresses and Applicable Lending Offices
SCHEDULE III Real Property
SCHEDULE IV Subsidiaries
SCHEDULE V Existing Indebtedness
SCHEDULE VI Insurance
SCHEDULE VII Existing Liens
SCHEDULE VIII Existing Investments
SCHEDULE IX ERISA Matters
SCHEDULE X Approvals
SCHEDULE XI Exceptions to Capitalization Representation
SCHEDULE XIII Existing Senior Secured Notes Collateral
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EXHIBIT A Notice of Borrowing
EXHIBIT B-1 U.S. Borrower Tranche A Term Note
EXHIBIT B-2 German Borrower Tranche A Term Note
EXHIBIT B-3 Delayed Draw Term Note
EXHIBIT B-4 Tranche B Term Note
EXHIBIT B-5 Tranche C Term Note
EXHIBIT B-6 Dollar Revolving Note
EXHIBIT B-7 Deutsche Mark Revolving Note
EXHIBIT B-8 Swingline Note
EXHIBIT C Letter of Credit Request
EXHIBIT D Section 4.04(b)(ii) Certificate
EXHIBIT E-1 Opinion of Milbank, Tweed, Hadley & McCloy, special U.S. counsel to the Credit Parties
EXHIBIT E-2 Opinion of Bruckhaus Westrick Stegmann, special German counsel to the Credit Parties
EXHIBIT E-3 Opinion of Schreck Morris, special Nevada counsel to the Credit Parties
EXHIBIT E-4 Opinion of Watkins Ludlam & Stennis, P.A., special Mississippi counsel to the Credit Parties
EXHIBIT E-5 Opinion of Hoffman Sutterfield Ensenat, special Louisiana counsel to the Credit Parties
EXHIBIT F Officers' Certificate
EXHIBIT G Bailee Agreement
EXHIBIT H-1 U.S. Subsidiaries Guaranty
EXHIBIT H-2 German Subsidiaries Guaranty
EXHIBIT I U.S. Pledge Agreement
EXHIBIT J U.S. Security Agreement
EXHIBIT K German Security Agreement
EXHIBIT L German Pledge Agreement
EXHIBIT M Solvency Certificate
EXHIBIT N-1 U.S. Borrower Borrowing Base Certificate
EXHIBIT N-2 German Borrowers Borrowing Base Certificate
EXHIBIT O Intercompany Loan Subordination Provisions
EXHIBIT P Assignment and Assumption Agreement
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CREDIT AGREEMENT, dated as of August 8, 1997, among ALLIANCE
GAMING CORPORATION, a Nevada corporation (the "U.S. Borrower"), BALLY WULFF
VERTRIEBS GMBH, a company with limited liability organized under the laws of the
Federal Republic of Germany ("Bally Wulff Vertriebs"), BALLY WULFF AUTOMATEN
GMBH, a company with limited liability organized under the laws of the Federal
Republic of Germany ("Bally Wulff Automaten" and, together with Bally Wulff
Vertriebs, the "German Borrowers," and each a "German Borrower" and the German
Borrowers, together with the U.S. Borrower, the "Borrowers," and each a
"Borrower"), the LENDERS party hereto from time to time and CREDIT SUISSE FIRST
BOSTON, as Administrative Agent (all capitalized terms used herein and defined
in Section 11 are used herein as therein defined).
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions set forth
herein, the Lenders are willing to make available to the U.S. Borrower and the
German Borrowers the respective credit facilities provided for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01 The Commitments. (a) Subject to and upon the terms and
conditions set forth herein, each Lender with a U.S. Borrower Tranche A Term
Loan Commitment severally agrees to make, on the Initial Borrowing Date and on
the PIK Preferred Drawdown Date, a term loan or term loans (each a "U.S.
Borrower Tranche A Term Loan" and, collectively, the "U.S. Borrower Tranche A
Term Loans") to the U.S. Borrower, which U.S. Borrower Tranche A Term Loans (i)
shall be made and maintained in Dollars, (ii) shall, in the case of U.S.
Borrower Tranche A Term Loans made on the Initial Borrowing Date, be made by
each Lender with a U.S. Borrower Tranche A Term Loan Commitment in that
principal amount as is equal to the U.S. Borrower Tranche A Term Loan Commitment
of such Lender on such date (before giving effect to any reductions thereto on
such date pursuant to Section 3.03(b)(i) but after giving effect to any
reductions thereto on or prior to such date pursuant to 3.03(b)(iii)) less such
Lender's A Share of the A PIK Preferred Holdback Amount as in effect on the
Initial Borrowing Date, (iii) shall, in the case of the U.S. Borrower Tranche A
Term Loans made on the PIK Preferred Drawdown Date, be made by each Lender with
a U.S. Borrower Tranche A Term Loan Commitment in an amount equal to the U.S.
Borrower Tranche A Term Loan Commitment of such Lender as in effect on such date
(before giving effect to any reductions thereto on such date pursuant to Section
3.03(b)(ii) but after giving effect to any reductions thereto on or prior to
such date pursuant to Section 3.03(b)(i) and (iii)) and
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(iv) shall, at the option of the U.S. Borrower, be incurred and/or maintained
as, and/or converted into, Base Rate Loans or Eurodollar Loans, provided that
(A) except as otherwise specifically provided in Section 1.10(b), all U.S.
Borrower Tranche A Term Loans comprising the same Borrowing shall at all times
be of the same Type and (B) except as expressly provided in the immediately
succeeding sentence, no more than three Borrowings of U.S. Borrower Tranche A
Term Loans maintained as Eurodollar Loans may be incurred or maintained prior to
the earlier of (1) the 90th day after the Initial Borrowing Date or, if an
Interest Period relating to any then outstanding U.S. Borrower Tranche A Term
Loans beginning before such 90th day extends thereafter, the last day of such
Interest Period, and (2) that date (the "Syndication Date") upon which the
Administrative Agent shall have determined in its sole discretion (and shall
have notified the U.S. Borrower) that the primary syndication (and resultant
addition of institutions as Lenders pursuant to Section 13.04(b)) has been
completed (each of which Borrowings of Eurodollar Loans may only have an
Interest Period of one month, and the first of which Borrowings may only be made
on a single date on or after the Initial Borrowing Date and on or prior to the
sixth Business Day following the Initial Borrowing Date, and the second and
third of which Borrowings may only be made on the last day of the immediately
preceding Interest Period). Notwithstanding the foregoing, to the extent that
U.S. Borrower Tranche A Term Loans are incurred after the Initial Borrowing Date
and at a time when the proviso to clause (iv) of the immediately preceding
sentence is applicable, then if the respective U.S. Borrower Tranche A Term Loan
is incurred during an Interest Period referenced in the proviso to clause (iv)
of the immediately preceding sentence, and to the extent that one or more
Interest Periods of less than one month's duration are then available to all of
the Lenders (which are making such U.S. Borrower Tranche A Term Loan) which end
on or prior to the last day of the Interest Period then in effect pursuant to
the proviso to clause (iv) of the immediately preceding sentence, such shorter
interest period shall be permitted to be selected, in each case so long as on
the last day of each Interest Period referenced in the proviso to clause (iv) of
the immediately preceding sentence no interest periods remain in effect pursuant
to this sentence which will end after such last day. Once repaid, U.S. Borrower
Tranche A Term Loans incurred hereunder may not be reborrowed.
(b) Subject to and upon the terms and conditions set forth herein,
each Lender with a German Borrower Tranche A Term Loan Commitment severally
agrees to make, on the Initial Borrowing Date, a term loan or term loans (each a
"German Borrower Tranche A Term Loan" and, collectively, the "German Borrower
Tranche A Term Loans") to the German Borrowers, which German Borrower Tranche A
Term Loans (i) shall be made and maintained in Deutsche Marks, (ii) shall be
made by each such Lender in that initial aggregate principal amount as is equal
to the German Borrower Tranche A Term Loan Commitment of such Lender on the
Initial Borrowing Date (before giving effect to any reductions thereto on such
date pursuant to Section 3.03(c)(i) but after giving effect to any reductions
thereto on or prior to such date pursuant to Section 3.03(c)(ii)) and (iii)
shall, at the option of the German Borrowers, be incurred and/or
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maintained as, and/or converted into, one or more Borrowings of Deutsche Mark
Loans, provided that no more than three Borrowings of German Borrower Tranche A
Term Loans may be incurred or maintained prior to the earlier of (1) the 90th
day after the Initial Borrowing Date or, if an Interest Period relating to any
then outstanding German Borrower Tranche A Term Loans beginning before such 90th
day extends thereafter, the last day of such Interest Period, and (2) the
Syndication Date (each of which Borrowings may only have an Interest Period of
one month, and the first of which Borrowings must begin on or after the Initial
Borrowing Date and on or prior to the sixth Business Day following the Initial
Borrowing Date, and which must be the first day of the first Interest Period, if
any, selected pursuant to the proviso to clause (iv) of the first sentence of
Section 1.01(a), and the second and third of which Borrowings may only be made
on the last day of the immediately preceding Interest Period). The proceeds of
each German Borrower Tranche A Term Loan shall be made available to the German
Borrowers as directed by them (with the proceeds to be used by the German
Borrowers as agreed by them), it being understood and agreed that the German
Borrowers shall be jointly and severally obligated with respect to each German
Borrower Tranche A Term Loan for the repayment thereof and all amounts owing
with respect thereto. Once repaid, German Borrower Tranche A Term Loans incurred
hereunder may not be reborrowed.
(c) Subject to and upon the terms and conditions set forth herein,
each Lender with a Delayed Draw Term Loan Commitment severally agrees to make,
on any Delayed Draw Term Loan Borrowing Date occurring on or prior to the
Delayed Draw Term Loan Commitment Termination Date, a term loan or term loans
(each a "Delayed Draw Term Loan" and, collectively, the "Delayed Draw Term
Loans") to the U.S. Borrower, which Delayed Draw Term Loans (i) shall be made
and maintained in Dollars, (ii) shall, in the case of the Delayed Draw Term
Loans being made on any Delayed Draw Term Loan Borrowing Date, be made by each
Lender with a Delayed Draw Term Loan Commitment in such principal amount (as
requested by the U.S. Borrower) as does not exceed the Delayed Draw Term Loan
Commitment of such Lender on such date (before giving effect to any reductions
thereto on such date pursuant to Sections 3.03(d)(i) and (ii), but after giving
effect to any reductions prior to such date pursuant to Sections 3.03(d)(i) and
(ii) and giving effect to any reductions thereto on or prior to such date
pursuant Section 3.03(d)(iii)) and (iii) shall, at the option of the U.S.
Borrower, be incurred and maintained as, and/or converted into, Base Rate Loans
or Eurodollar Loans, provided that (A) except as otherwise specifically provided
in Section 1.10(b), all Delayed Draw Term Loans comprising the same Borrowing
shall at all times be of the same Type and (B) except as expressly provided in
the immediately succeeding sentence, no more than three Borrowings of Delayed
Draw Term Loans maintained as Eurodollar Loans may be incurred or maintained
prior to the earlier of (1) the 90th day after the Initial Borrowing Date or, if
an Interest Period relating to any then outstanding Delayed Draw Term Loans
beginning before such 90th day extends thereafter, the last day of such Interest
Period, and (2) the Syndication Date (each of which Borrowings of Eurodollar
Loans may only have an Interest Period of one month, and each of which Interest
Periods
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must begin and end on the same day as an Interest Period selected pursuant to
clause (B) of the proviso to clause (iv) of the first sentence of Section
1.01(a)). Notwithstanding the foregoing, to the extent that Delayed Draw Term
Loans are incurred after the Initial Borrowing Date and at a time when the
proviso to clause (iv) of the first sentence of Section 1.01(a) is applicable,
then if the respective Delayed Draw Term Loan is incurred during an Interest
Period referenced in the proviso to clause (iv) the first sentence of Section
1.01(a), and to the extent that one or more Interest Periods of less than one
month's duration are then available to all of the Lenders (which are making such
Delayed Draw Term Loan) which end on or prior to the last day of the Interest
Period then in effect pursuant to the proviso to clause (iv) of the first
sentence of Section 1.01(a), such shorter interest period shall be permitted to
be selected, in each case so long as on the last day of each Interest Period
referenced in the proviso to clause (iv) of the first sentence of Section
1.01(a) no interest periods remain in effect pursuant to this sentence which
will end after such last day. Once repaid, Delayed Draw Term Loans incurred
hereunder may not be reborrowed.
(d) Subject to and upon the terms and conditions set forth herein,
each Lender with a Tranche B Term Loan Commitment severally agrees to make, on
the Initial Borrowing Date and on the PIK Preferred Drawdown Date, a term loan
or term loans (each a "Tranche B Term Loan" and, collectively, the "Tranche B
Term Loans") to the U.S. Borrower, which Tranche B Term Loans (i) shall be made
and maintained in Dollars, (ii) shall, in the case of Tranche B Term Loans made
on the Initial Borrowing Date, be made by each Lender with a Tranche B Term Loan
Commitment in that principal amount as is equal to the Tranche B Term Loan
Commitment of such Lender on such date (before giving effect to any reductions
thereto on such date pursuant to Section 3.03(e)(i) but after giving effect to
any reductions thereto on or prior to such date pursuant to 3.03(e)(iii)) less
such Lender's B Share of the B PIK Preferred Holdback Amount as in effect on the
Initial Borrowing Date, (iii) shall, in the case of the Tranche B Term Loans
made on the PIK Preferred Drawdown Date, be made by each Lender with a Tranche B
Term Loan Commitment in an amount equal to the Tranche B Term Loan Commitment of
such Lender as in effect on such date (before giving effect to any reductions
thereto on such date pursuant to Section 3.03(e)(ii) but after giving effect to
any reductions thereto on or prior to such date pursuant to Section
3.03(e)(iii)) and (iv) shall, at the option of the U.S. Borrower, be incurred
and maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans,
provided that (A) except as otherwise specifically provided in Section 1.10(b),
all Tranche B Term Loans comprising the same Borrowing shall at all times be of
the same Type and (B) except as expressly provided in the immediately succeeding
sentence, no more than three Borrowings of Tranche B Term Loans maintained as
Eurodollar Loans may be incurred or maintained prior to the earlier of (1) the
90th day after the Initial Borrowing Date or, if an Interest Period relating to
any then outstanding Tranche B Term Loans beginning before such 90th day extends
thereafter, the last day of such Interest Period, and (2) the Syndication Date
(each of which Borrowings of Eurodollar Loans may only have an Interest Period
of one month, and each of which
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Interest Periods must begin and end on the same day as an Interest Period
selected pursuant to clause (B) of the proviso to clause (iv) of the first
sentence of Section 1.01(a)). Notwithstanding the foregoing, to the extent that
Tranche B Term Loans are incurred after the Initial Borrowing Date and at a time
when the proviso to clause (iv) of the first sentence of Section 1.01(a) is
applicable, then if the respective Tranche B Term Loan is incurred during an
Interest Period referenced in the proviso to clause (iv) the first sentence of
Section 1.01(a), and to the extent that one or more Interest Periods of less
than one month's duration are then available to all of the Lenders (which are
making such Tranche B Term Loan) which end on or prior to the last day of the
Interest Period then in effect pursuant to the proviso to clause (iv) of the
first sentence of Section 1.01(a), such shorter interest period shall be
permitted to be selected, in each case so long as on the last day of each
Interest Period referenced in the proviso to clause (iv) of the first sentence
of Section 1.01(a) no interest periods remain in effect pursuant to this
sentence which will end after such last day. Once repaid, Tranche B Term Loans
incurred hereunder may not be reborrowed.
(e) Subject to and upon the terms and conditions set forth herein,
each Lender with a Tranche C Term Loan Commitment severally agrees to make, on
the Initial Borrowing Date and on the PIK Preferred Drawdown Date, a term loan
or term loans (each a "Tranche C Term Loan" and, collectively, the "Tranche C
Term Loans") to the U.S. Borrower, which Tranche C Term Loans (i) shall be made
and maintained in Dollars, (ii) shall, in the case of Tranche C Term Loans made
on the Initial Borrowing Date, be made by each Lender with a Tranche C Term Loan
Commitment in that principal amount as is equal to the Tranche C Term Loan
Commitment of such Lender on such date (before giving effect to any reductions
thereto on such date pursuant to Section 3.03(f)(i) but after giving effect to
any reductions thereto on or prior to such date pursuant to 3.03(f)(iii)) less
such Lender's C Share of the C PIK Preferred Holdback Amount as in effect on the
Initial Borrowing Date, (iii) shall, in the case of the Tranche C Term Loans
made on the PIK Preferred Drawdown Date, be made by each Lender with a Tranche C
Term Loan Commitment in an amount equal to the Tranche C Term Loan Commitment of
such Lender as in effect on such date (before giving effect to any reductions
thereto on such date pursuant to Section 3.03(f)(ii) but after giving effect to
any reductions thereto on or prior to such date pursuant to Section
3.03(f)(iii)) and (iv) shall, at the option of the U.S. Borrower, be incurred
and maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans,
provided that (A) except as otherwise specifically provided in Section 1.10(b),
all Tranche C Term Loans comprising the same Borrowing shall at all times be of
the same Type and (B) except as expressly provided in the immediately succeeding
sentence, no more than three Borrowings of Tranche C Term Loans maintained as
Eurodollar Loans may be incurred prior to the earlier of (1) the 90th day after
the Initial Borrowing Date or, if an Interest Period relating to any then
outstanding Tranche C Term Loans beginning before such 90th day extends
thereafter, the last day of such Interest Period, and (2) the Syndication Date
(each of which Borrowings of Eurodollar Loans may only have an Interest Period
of one month, and each of which Interest Periods must begin
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and end on the same day as an Interest Period selected pursuant to clause (B) of
the proviso to clause (iv) of the first sentence of Section 1.01(a)).
Notwithstanding the foregoing, to the extent that Tranche C Term Loans are
incurred after the Initial Borrowing Date and at a time when the proviso to
clause (iv) of the first sentence of Section 1.01(a) is applicable, then if the
respective Tranche C Term Loan is incurred during an Interest Period referenced
in the proviso to clause (iv) the first sentence of Section 1.01(a), and to the
extent that one or more Interest Periods of less than one month's duration are
then available to all of the Lenders (which are making such Tranche C Term Loan)
which end on or prior to the last day of the Interest Period then in effect
pursuant to the proviso to clause (iv) of the first sentence of Section 1.01(a),
such shorter interest period shall be permitted to be selected, in each case so
long as on the last day of each Interest Period referenced in the proviso to
clause (iv) of the first sentence of Section 1.01(a) no interest periods remain
in effect pursuant to this sentence which will end after such last day. Once
repaid, Tranche C Term Loans incurred hereunder may not be reborrowed.
(f) Subject to and upon the terms and conditions set forth herein,
each Lender with a Revolving Loan Commitment severally agrees, at any time and
from time to time on and after the Initial Borrowing Date and prior to the
Revolving Loan Maturity Date, to make a revolving loan or revolving loans to the
U.S. Borrower (individually), and each German Revolving Lender severally agrees,
at any time and from time to time on and after the Initial Borrowing Date and
prior to the Revolving Loan Maturity Date, to make a revolving loan or revolving
loans to the German Borrowers (on a joint and several basis) (with the revolving
loans made to the U.S. Borrower (individually) or the German Borrowers (on a
joint and several basis) pursuant to this Section 1.01(f) being each called a
"Revolving Loan" and, collectively, the "Revolving Loans"), which Revolving
Loans (i) shall, in the case of Revolving Loans made to the U.S. Borrower, be
made and maintained in Dollars (each a "Dollar Revolving Loan" and,
collectively, the "Dollar Revolving Loans"), which Dollar Revolving Loans shall,
at the option of the U.S. Borrower, be incurred and maintained as, and/or
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converted into, Base Rate Loans and Eurodollar Loans, provided that (A) except
as otherwise specifically provided in Section 1.10(b), all Dollar Revolving
Loans comprising the same Borrowing shall at all times be of the same Type and
(B) except as expressly provided in the immediately succeeding sentence, no more
than three Borrowings of Revolving Loans maintained as Eurodollar Loans may be
incurred or maintained prior to the earlier of (1) the 90th day after the
Initial Borrowing Date and (2) the Syndication Date (each of which Borrowings of
Eurodollar Loans may only have an Interest Period of one month, and each of
which Interest Periods must begin and end on the same day as an Interest Period
selected pursuant to clause (B) of the proviso to clause (iv) of the first
sentence of Section 1.01(a)), (ii) shall, in the case of Revolving Loans made to
the German Borrowers, be made and maintained in Deutsche Marks (each a "Deutsche
Mark Revolving Loan" and, collectively, the "Deutsche Mark Revolving Loans"),
which Deutsche Mark Revolving Loans shall, at the option of the German
Borrowers, be incurred and/or maintained as, and/or converted into, one or more
Borrowings of Deutsche Mark Revolving Loans, provided that no more than three
Borrowings of Deutsche Mark Revolving Loans may be incurred or maintained prior
to the earlier of (1) the 90th day after the Initial Borrowing Date or, if an
Interest Period relating to any then outstanding Loans beginning before such
90th day extends thereafter, the last day of such Interest Period and (2) the
Syndication Date (each of which Borrowings may only have an Interest Period of
one month, and each of which Interest Periods must begin and end on the same day
as an Interest Period selected pursuant to clause (B) of the proviso to clause
(iv) of the first sentence of Section 1.01(a)), (iii) may be repaid and
reborrowed in accordance with the provisions hereof, (iv) shall not exceed for
any Lender at the time of the making of any such Revolving Loans, and after
giving effect thereto, that aggregate principal amount (for this purpose, using
the Dollar Equivalent of each outstanding Deutsche Mark Revolving Loan of such
Lender or any Affiliate thereof acting as a German Revolving Lender) which, when
added to the sum of (I) the aggregate principal amount of all other Revolving
Loans then outstanding from such Lender (for this purpose, using the Dollar
Equivalent of each Deutsche Mark Revolving Loan then outstanding from such
Lender or any Affiliate thereof acting as a German Revolving Lender) and (II)
the product of (A) such Lender's RL Percentage and (B) the sum of (x) the
aggregate amount of all U.S. Letter of Credit Outstandings (exclusive of Unpaid
Drawings which are repaid with the proceeds of, and simultaneously with the
incurrence of, the respective incurrence of Revolving Loans) at such time and
(y) the aggregate principal
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amount of all Swingline Loans (exclusive of Swingline Loans which are repaid
with the proceeds of, and simultaneously with the incurrence of, the respective
incurrence of Revolving Loans) then outstanding and (III) the product of (A)
such Lender's (or its respective Affiliate's) German RL Percentage and (B) the
aggregate amount of all German Letter of Credit Outstandings (exclusive of
Unpaid Drawings which are repaid with the proceeds of, and simultaneously with
the incurrence of, the respective incurrence of Revolving Loans) at such time,
equals the Revolving Loan Commitment of such Lender at such time, (v) shall not,
in the case of Deutsche Mark Revolving Loans, exceed for any German Revolving
Lender at the time of the making of any such Deutsche Mark Revolving Loans, and
after giving effect thereto, that aggregate principal amount (for this purpose,
using the Dollar Equivalent thereof) which, when added to the sum of (I) the
aggregate principal amount of all other Deutsche Mark Revolving Loans then
outstanding from such German Revolving Lender (for this purpose, using the
Dollar Equivalent thereof) and (II) the product of (A) such German Revolving
Lender's German RL Percentage and (B) the aggregate amount of all German Letter
of Credit Outstandings (exclusive of Unpaid Drawings which are repaid with the
proceeds of, and simultaneously with the incurrence of, the respective Deutsche
Mark Revolving Loans) at such time, equals the German Revolving Loan
Sub-Commitment of such German Revolving Lender at such time, (vi) shall not, in
the case of Dollar Revolving Loans, at any time exceed in aggregate outstanding
principal amount, when added to (x) the aggregate amount of all U.S. Letter of
Credit Outstandings (exclusive of any Unpaid Drawings with respect thereto which
are repaid with the proceeds of, and simultaneously with the incurrence of, the
respective incurrence of Dollar Revolving Loans) and (y) the aggregate principal
amount of all Swingline Loans (exclusive of Swingline Loans which are repaid
with the proceeds of, and simultaneously with the incurrence of Dollar Revolving
Loans), the U.S. Borrowing Base at such time, (vii) shall not, in the case of
Deutsche Mark Revolving Loans (expressed in Deutsche Marks), at any time exceed
in aggregate outstanding principal amount, when added to the aggregate amount of
all German Letter of Credit Outstandings (expressed in Deutsche Marks (and
taking the Deutsche Mark Equivalent of the Stated Amount of any German Letter of
Credit denominated in a currency other than Deutsche Marks)) (exclusive of any
Unpaid Drawings with respect thereto which are repaid with the proceeds of, and
simultaneously with the incurrence of, the respective Deutsche Mark Revolving
Loans), the German Borrowing Base at such time and (viii) shall not, in the case
of all Deutsche Mark Revolving Loans, at any time exceed in aggregate
outstanding principal amount (for this purpose, using the Dollar Equivalent of
each outstanding Deutsche Mark Revolving Loan), when added to the aggregate
amount of all German Letter of Credit Outstandings (exclusive of any Unpaid
Drawings with respect thereto which are repaid with the proceeds of, and
simultaneously with the incurrence of, the respective Deutsche Mark Revolving
Loans), the lesser of (x) the Total German Revolving Loan Sub-Commitment at such
time and (y) $55,000,000. Notwithstanding the foregoing, to the extent that
Dollar Revolving Loans are incurred after the Initial Borrowing Date and at a
time when the proviso to clause (iv) of the first sentence of Section 1.01(a) is
applicable, then if the respective Dollar Revolving Loan is incurred during an
Interest Period referenced in the proviso to clause (iv) the first sentence of
Section 1.01(a), and to the extent that one or more Interest Periods of less
than one month's duration are then available to all of the Lenders (which are
making such Dollar Revolving Loan) which end on or prior to the last day of the
Interest Period then in effect pursuant to the proviso to clause (iv) of the
first sentence of Section 1.01(a), such shorter interest period shall be
permitted to be selected, in each case so long as on the last day of each
Interest Period referenced in the proviso to clause (iv) of the first sentence
of Section 1.01(a) no interest periods remain in effect pursuant to this
sentence which will end after such last day. The proceeds of each Deutsche Mark
Revolving Loan shall be made available to the German Borrowers as directed by
them (with the proceeds to be used by the German Borrowers as agreed by them),
it being understood and agreed that the German Borrowers shall be jointly and
severally obligated with respect to each Deutsche Mark Revolving Loan for the
repayment thereof and all amounts owing with respect thereto. The German
Borrowers shall have no liability with respect to any Dollar Revolving Loans,
which shall be extended to, and shall constitute obligations of, the U.S.
Borrower.
(g) Subject to and upon the terms and conditions set forth herein,
CSFB in its individual capacity agrees to make, from time to time after the
Initial Borrowing Date and prior to the Swingline Expiry Date, a revolving loan
or revolving loans (each a "Swingline Loan" and, collectively, the "Swingline
Loans") to the U.S. Borrower, which Swingline Loans (i) shall be made and
maintained in Dollars, (ii) shall be made and maintained as Base Rate Loans,
(iii) may be repaid and reborrowed in accordance with the
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provisions hereof, (iv) shall not exceed in aggregate principal amount at any
time outstanding, when combined with the aggregate principal amount of all
Revolving Loans (for this purpose, using the Dollar Equivalent of each
outstanding Deutsche Mark Revolving Loan) then outstanding and the Letter of
Credit Outstandings at such time, an amount equal to the Total Revolving Loan
Commitment at such time (after giving effect to any reductions to the Total
Revolving Loan Commitment on such date), (v) shall not exceed in the aggregate
principal amount at any time outstanding, when combined with the aggregate
principal amount of all Dollar Revolving Loans then outstanding and the U.S.
Letter of Credit Outstandings at such time, an amount equal to the U.S.
Borrowing Base at such time and (vi) shall not exceed in aggregate principal
amount at any time outstanding, the Maximum Swingline Amount. CSFB shall not be
obligated to make any Swingline Loans at a time when a Lender Default exists
unless CSFB has entered into arrangements satisfactory to it to eliminate CSFB's
risk with respect to the Defaulting Lender's or Lenders' participation in such
Swingline Loans, including by cash collateralizing such Defaulting Lender's or
Lenders' RL Percentage of the outstanding Swingline Loans. Notwithstanding
anything to the contrary contained in this Section 1.01(g), CSFB shall not make
any Swingline Loan after it has received written notice from the U.S. Borrower,
any German Borrower or the Required Lenders stating that a Default or an Event
of Default exists and is continuing until such time as CSFB shall have received
written notice (i) of rescission of all such notices from the party or parties
originally delivering such notice, (ii) of the waiver of such Default or Event
of Default by the Required Lenders or (iii) that the Administrative Agent in
good faith believes such Default or Event of Default has ceased to exist.
(h) On any Business Day, CSFB may, in its sole discretion, give
notice to the Lenders that its outstanding Swingline Loans shall be funded with
a Borrowing of Dollar Revolving Loans (provided that such notice shall be deemed
to have been automatically given upon the occurrence of a Default or an Event of
Default under Section 10.05 or upon the exercise of any of the remedies provided
in the last paragraph of Section 10), in which case a Borrowing of Dollar
Revolving Loans constituting Base Rate Loans (each such Borrowing, a "Mandatory
Borrowing") shall be made on the immediately succeeding Business Day by all
Lenders with a Revolving Loan Commitment (without giving effect to any
reductions thereto pursuant to the last paragraph of Section 10) pro rata based
on each Lender's RL Percentage (determined on such date, but before giving
effect to any termination of the Revolving Loan Commitments pursuant to the last
paragraph of Section 10) and the proceeds thereof shall be applied directly to
CSFB to repay CSFB for such outstanding Swingline Loans. All Dollar Revolving
Loans made pursuant to each Mandatory Borrowing shall constitute obligations of
the U.S. Borrower, and not of the German Borrowers. Each such Lender hereby
irrevocably agrees to make Revolving Loans upon one Business Day's notice
pursuant to each Mandatory Borrowing in the amount and in the manner specified
in the preceding sentence and on the date specified in writing by CSFB
notwithstanding (i) that the amount of the Mandatory Borrowing may not comply
with the minimum amount for Borrowings otherwise required
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hereunder, (ii) whether any conditions specified in Section 6 are then
satisfied, (iii) whether a Default or an Event of Default then exists, (iv) the
date of such Mandatory Borrowing and (v) the amount of the Total Revolving Loan
Commitment or the U.S. Borrowing Base at such time. In the event that any
Mandatory Borrowing cannot for any reason be made on the date otherwise required
above (including, without limitation, as a result of the commencement of a
proceeding under the Bankruptcy Code with respect to the U.S. Borrower), then
each such Lender hereby agrees that it shall forthwith purchase (as of the date
the Mandatory Borrowing would otherwise have occurred, but adjusted for any
payments received from the U.S. Borrower on or after such date and prior to such
purchase) from CSFB such participations in the outstanding Swingline Loans as
shall be necessary to cause such Lenders to share in such Swingline Loans
ratably based upon their respective RL Percentages (determined before giving
effect to any termination of the Revolving Loan Commitments pursuant to the last
paragraph of Section 10), provided that (x) all interest payable on the
Swingline Loans shall be for the account of CSFB until the date as of which the
respective participation is required to be purchased and, to the extent
attributable to the purchased participation, shall be payable to the participant
from and after such date and (y) at the time any purchase of participations
pursuant to this sentence is actually made, the purchasing Lender shall be
required to pay CSFB interest on the principal amount of the participation
purchased for each day from and including the day upon which the Mandatory
Borrowing would otherwise have occurred to but excluding the date of payment for
such participation, at the overnight Federal Funds Rate for the first three days
and at the rate otherwise applicable to Revolving Loans maintained as Base Rate
Loans hereunder for each day thereafter.
1.02 Minimum Amount of Each Borrowing. The aggregate principal
amount of each Borrowing of Loans shall not be less than the respective Minimum
Borrowing Amount for the respective Type and Tranche of Loans to be made or
maintained pursuant to the respective Borrowing. More than one Borrowing may
occur on the same date, but at no time shall there be outstanding more than
three (or ten in the case of Revolving Loans only) Borrowings of Euro Rate Loans
of a single Tranche.
1.03 Notice of Borrowing. (a) Whenever the U.S. Borrower or the
German Borrowers desire to incur Loans hereunder (excluding Borrowings (x) of
Swingline Loans and (y) Revolving Loans incurred pursuant to a Mandatory
Borrowing), it (or they) shall give the Administrative Agent at its Notice
Office at least one Business Day's prior written notice (or telephonic notice
promptly confirmed in writing) of each Base Rate Loan and at least three
Business Days' prior written notice (or telephonic notice promptly confirmed in
writing) of each Euro Rate Loan to be incurred hereunder, provided that any such
notice shall be deemed to have been given on a certain day only if given before
12:00 Noon (New York time) on such day. Each such written notice or written
confirmation of telephonic notice (each a "Notice of Borrowing"), except as
otherwise expressly provided in Section 1.10, shall be irrevocable and shall be
given by the U.S. Borrower or the German Borrowers, as the case may be, in the
form of Exhibit A,
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appropriately completed to specify (i) the name of such Borrower or Borrowers,
(ii) the aggregate principal amount of the Loans to be incurred pursuant to such
Borrowing (stated in the Applicable Currency), (iii) the date of such Borrowing
(which shall be a Business Day), (iv) whether the Loans being incurred pursuant
to such Borrowing shall constitute U.S. Borrower Tranche A Term Loans, German
Borrower Tranche A Term Loans, Delayed Draw Term Loans, Tranche B Term Loans,
Tranche C Term Loans or Revolving Loans, (v) in the case of Dollar Loans,
whether the Loans being incurred pursuant to such Borrowing are to be initially
maintained as Base Rate Loans or Eurodollar Loans and (vi) in the case of Euro
Rate Loans, the initial Interest Period to be applicable thereto. The
Administrative Agent shall promptly give each Lender which is required to make
Loans of the Tranche specified in the respective Notice of Borrowing, notice of
such proposed Borrowing, of such Lender's proportionate share thereof and of the
other matters required by the immediately preceding sentence to be specified in
the Notice of Borrowing.
(b)(i) Whenever the U.S. Borrower desires to incur Swingline
Loans hereunder, it shall give CSFB not later than 2:00 P.M. (New York time) on
the date that a Swingline Loan is to be incurred, written notice or telephonic
notice promptly confirmed in writing of each Swingline Loan to be incurred
hereunder. Each such notice shall be irrevocable and specify in each case (A)
the date of Borrowing (which shall be a Business Day) and (B) the aggregate
principal amount of the Swingline Loans to be made pursuant to such Borrowing.
(ii) Mandatory Borrowings shall be made upon the notice specified
in Section 1.01(h), with the U.S. Borrower irrevocably agreeing, by its
incurrence of any Swingline Loan, to the making of the Mandatory Borrowings as
set forth in Section 1.01(h).
(c) Without in any way limiting the obligation of any Borrower to
confirm in writing any telephonic notice permitted to be given hereunder, the
Administrative Agent, CSFB (in the case of a Borrowing of Swingline Loans) or
the Issuing Bank (in the case of issuances of Letters of Credit), as the case
may be, may act without liability upon the basis of such telephonic notice,
believed by the Administrative Agent, CSFB or the Issuing Bank, as the case may
be, in good faith to be from an Authorized Telephone Officer of the U.S.
Borrower (or, in the case of any Loan to the German Borrowers, such notice shall
be given by an Authorized Telephone Officer of either the U.S. Borrower or
either German Borrower) prior to receipt of written confirmation. In each such
case, each Borrower hereby waives the right to dispute the Administrative
Agent's, CSFB's or Issuing Bank's record of the terms of such telephonic notice.
1.04 Disbursement of Funds. Not later than 12:00 Noon (New York
time or, in the case of any Deutsche Mark Loan to be made available in
Frankfurt, 12:00 Noon
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Frankfurt time, if so requested by a German Borrower) on the date specified in
each Notice of Borrowing (or (x) in the case of Swingline Loans, not later than
4:00 P.M. (New York time) on the date specified in Section 1.03(b)(i) or (y) in
the case of Mandatory Borrowings, not later than 12:00 Noon (New York time) on
the date specified in Section 1.01(h)), each Lender with a Commitment of the
respective Tranche will make available its pro rata portion (determined in
accordance with Section 1.07) of each such Borrowing requested to be made on
such date (or in the case of Swingline Loans, CSFB shall make available the full
amount thereof) in the manner provided below. All such amounts will be made
available in Dollars (in the case of Dollar Loans) or Deutsche Marks (in the
case of Deutsche Mark Loans), as the case may be, and in immediately available
funds at the appropriate Payment Office of the Administrative Agent, and the
Administrative Agent will make available to the U.S. Borrower or German
Borrowers, as the case may be, by depositing to its, or their, relevant account
as directed by the respective Borrower or Borrowers the aggregate of the amounts
so made available by the Lenders in the type of funds received. Unless the
Administrative Agent shall have been notified by any Lender prior to the date of
Borrowing that such Lender does not intend to make available to the
Administrative Agent such Lender's portion of any Borrowing to be made on such
date, the Administrative Agent may assume that such Lender has made such amount
available to the Administrative Agent on such date of Borrowing and the
Administrative Agent may, in reliance upon such assumption, make available to
the relevant Borrower a corresponding amount. If such corresponding amount is
not in fact made available to the Administrative Agent by such Lender, the
Administrative Agent shall be entitled to recover such corresponding amount on
demand from such Lender. If such Lender does not pay such corresponding amount
forthwith upon the Administrative Agent's demand therefor, the Administrative
Agent shall promptly notify the U.S. Borrower or, in the case of German Loans,
the German Borrowers and the respective Borrower or Borrowers shall immediately
pay such corresponding amount to the Administrative Agent. The Administrative
Agent shall also be entitled to recover on demand from such Lender or the U.S.
Borrower or German Borrowers, as the case may be, interest on such corresponding
amount in respect of each day from the date such corresponding amount was made
available by the Administrative Agent to the respective Borrower or Borrowers
until the date such corresponding amount is recovered by the Administrative
Agent, at a rate per annum equal to (i) if recovered from such Lender, the
overnight Federal Funds Rate as in effect from time to time and (ii) if
recovered from the respective Borrower or Borrowers, the rate of interest
applicable to the respective Borrowing, as determined pursuant to Section 1.08.
Nothing in this Section 1.04 shall be deemed to relieve any Lender from its
obligation to make Loans hereunder or to prejudice any rights which the relevant
Borrower or Borrowers may have against any Lender as a result of any failure by
such Lender to make Loans required to be made by it hereunder.
1.05 Notes. (a) The U.S. Borrower's or, in the case of Deutsche
Mark Loans, the German Borrowers' obligation to pay the principal of, and
interest on, the Loans made by each Lender shall be evidenced (i) if U.S.
Borrower Tranche A Term
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Loans, by a promissory note duly executed and delivered by the U.S. Borrower
substantially in the form of Exhibit B-1, with blanks appropriately completed in
conformity herewith (each a "U.S. Borrower Tranche A Term Note" and,
collectively, the "U.S. Borrower Tranche A Term Notes"), (ii) if German Borrower
Tranche A Term Loans, by a promissory note duly executed and delivered by the
German Borrowers substantially in the form of Exhibit B-2, with blanks
appropriately completed in conformity herewith (each a "German Borrower Tranche
A Term Note" and collectively, the "German Borrower Tranche A Term Notes"),
(iii) if Delayed Draw Term Loans, by a promissory note to be executed and
delivered by the U.S. Borrower substantially in the form of Exhibit B-3, with
blanks appropriately completed in conformity herewith (each a "Delayed Draw Term
Note" and, collectively, the "Delayed Draw Term Notes"), (iv) if Tranche B Term
Loans, by a promissory note duly executed and delivered by the U.S. Borrower
substantially in the form of Exhibit B-4, with blanks appropriately completed in
conformity herewith (each a "Tranche B Term Note" and, collectively, the
"Tranche B Term Notes"), (v) if Tranche C Term Loans, by a promissory note duly
executed and delivered by the U.S. Borrower substantially in the form of Exhibit
B-5, with blanks appropriately completed in conformity herewith (each a "Tranche
C Term Note" and, collectively, the "Tranche C Term Notes"), (vi) if Dollar
Revolving Loans, by a promissory note duly executed and delivered by the U.S.
Borrower substantially in the form of Exhibit B-6, with blanks appropriately
completed in conformity herewith (each a "Dollar Revolving Note" and,
collectively, the "Dollar Revolving Notes"), (vii) if Deutsche Mark Revolving
Loans, by a promissory note duly executed and delivered by the German Borrowers
substantially in the form of Exhibit B-7, with blanks appropriately completed in
conformity herewith (each a "Deutsche Mark Revolving Note" and, collectively,
the "Deutsche Mark Revolving Notes") and (viii) if Swingline Loans, by a
promissory note duly executed and delivered by the U.S. Borrower substantially
in the form of Exhibit B-8, with blanks appropriately completed in conformity
herewith (the "Swingline Note").
(b) The U.S. Borrower Tranche A Term Note issued to each Lender
that has a U.S. Borrower Tranche A Term Loan Commitment or outstanding U.S.
Borrower Tranche A Term Loans shall (i) be executed by the U.S. Borrower, (ii)
be payable to the order of such Lender and be dated the Initial Borrowing Date
(or if issued thereafter, the date of issuance), (iii) be in a stated principal
amount equal to the U.S. Borrower Tranche A Term Loans of such Lender plus, if
the respective U.S. Borrower Tranche A Term Note is issued at any time when the
U.S. Borrower Tranche A Term Loan Commitment of such Lender remains in effect,
the amount of such Lender's U.S. Borrower Tranche A Term Loan Commitment on the
date of such issuance, and be payable in Dollars in the outstanding principal
amount of U.S. Borrower Tranche A Term Loans evidenced thereby, (iv) mature on
the Tranche A Term Loan Maturity Date, (v) bear interest as provided in the
appropriate clause of Section 1.08 in respect of the Base Rate Loans and
Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to
voluntary prepayment as provided in Section 4.01, and mandatory repayment as
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provided in Section 4.02 and (vii) be entitled to the benefits of this Agreement
and the other Credit Documents.
(c) The German Borrower Tranche A Term Note issued to each Lender
that has a German Borrower Tranche A Term Loan Commitment or outstanding German
Borrower Tranche A Term Loans shall be (i) executed by the German Borrowers, on
a joint and several basis (with each of the German Borrowers being jointly and
severally liable for all amounts owing under, or evidenced by, each German
Borrower Tranche A Term Note), (ii) be payable to the order of such Lender and
be dated the Initial Borrowing Date (or if issued thereafter, the date of
issuance), (iii) be in a stated principal amount equal to the German Borrower
Tranche A Term Loans of such Lender and payable in Deutsche Marks in the
outstanding principal amount of German Borrower Tranche A Term Loans evidenced
thereby, (iv) mature on the Tranche A Term Loan Maturity Date, (v) bear interest
as provided in the appropriate clause of Section 1.08 in respect of the Deutsche
Mark Loans evidenced thereby, (vi) be subject to voluntary prepayment as
provided in Section 4.01, and mandatory repayment as provided in Section 4.02
and (vii) be entitled to the benefits of this Agreement and other Credit
Documents.
(d) The Delayed Draw Term Note issued to each Lender that has a
Delayed Draw Term Loan Commitment or outstanding Delayed Draw Term Loans shall
(i) be executed by the U.S. Borrower, (ii) be payable to the order of such
Lender and be dated the Initial Borrowing Date (or if issued thereafter, the
date of issuance), (iii) be in a stated principal amount equal to the Delayed
Draw Term Loans, if any, of such Lender plus, if the respective Delayed Draw
Term Note is issued at any time when the Delayed Draw Term Loan Commitment of
such Lender remains in effect, the amount of such Lender's Delayed Draw Term
Loan Commitment on the date of such issuance, and be payable in Dollars in the
outstanding principal amount of Delayed Draw Term Loans evidenced thereby, (iv)
mature on the Delayed Draw Term Loan Maturity Date, (v) bear interest as
provided in the appropriate clause of Section 1.08 in respect of Base Rate Loans
and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to
voluntary prepayment as provided in Section 4.01, and mandatory repayment as
provided in Section 4.02 and (vii) be entitled to the benefits of this Agreement
and the other Credit Documents.
(e) The Tranche B Term Note issued to each Lender that has a
Tranche B Term Loan Commitment or outstanding Tranche B Term Loans shall (i) be
executed by the U.S. Borrower, (ii) be payable to the order of such Lender and
be dated the Initial Borrowing Date (or if issued thereafter, the date of
issuance), (iii) be in a stated principal amount equal to the Tranche B Term
Loans of such Lender plus, if the respective Tranche B Term Note is issued at
any time when the Tranche B Term Loan Commitment of such Lender remains in
effect, the amount of such Lender's Tranche B Term Loan Commitment on the date
of such issuance, and be payable in Dollars in the outstanding principal amount
of Tranche B Term Loans evidenced thereby, (iv) mature on
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the Tranche B Term Loan Maturity Date, (v) bear interest as provided in the
appropriate clause of Section 1.08 in respect of the Base Rate Loans and
Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to
voluntary prepayment as provided in Section 4.01, and mandatory repayment as
provided in Section 4.02 and (vii) be entitled to the benefits of this Agreement
and the other Credit Documents.
(f) The Tranche C Term Note issued to each Lender that has a
Tranche C Term Loan Commitment or outstanding Tranche C Term Loans shall (i) be
executed by the U.S. Borrower, (ii) be payable to the order of such Lender and
be dated the Initial Borrowing Date (or if issued thereafter, the date of
issuance), (iii) be in a stated principal amount equal to the Tranche C Term
Loans of such Lender plus, if the respective Tranche C Term Note is issued at
any time when the Tranche C Term Loan Commitment of such Lender remains in
effect, the amount of such Lender's Tranche C Term Loan Commitment on the date
of such issuance, and be payable in Dollars in the outstanding principal amount
of Tranche C Term Loans evidenced thereby, (iv) mature on the Tranche C Term
Loan Maturity Date, (v) bear interest as provided in the appropriate clause of
Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case
may be, evidenced thereby, (vi) be subject to voluntary prepayment as provided
in Section 4.01, and mandatory repayment as provided in Section 4.02 and (vii)
be entitled to the benefits of this Agreement and the other Credit Documents.
(g) The Dollar Revolving Note issued to each Lender that has a
Revolving Loan Commitment or outstanding Dollar Revolving Loans shall (i) be
executed by the U.S. Borrower, (ii) be payable to the order of such Lender and
be dated the Initial Borrowing Date (or if issued thereafter, the date of
issuance), (iii) be in a stated principal amount equal to the Revolving Loan
Commitment of such Lender and be payable in Dollars in the outstanding principal
amount of Dollar Revolving Loans evidenced thereby, (iv) mature on the Revolving
Loan Maturity Date, (v) bear interest as provided in the appropriate clause of
Section 1.08 in respect of Base Rate Loans and Eurodollar Loans, as the case may
be, evidenced thereby, (vi) be subject to voluntary prepayment as provided in
Section 4.01, and mandatory repayment as provided in Section 4.02 and (vii) be
entitled to the benefits of this Agreement and the other Credit Documents.
(h) The Deutsche Mark Revolving Note issued to each Lender that
has a German Revolving Loan Sub-Commitment or outstanding Deutsche Mark
Revolving Loans shall (i) be executed by the German Borrowers, on a joint and
several basis (with each of the German Borrowers being jointly and severally
liable for all amounts owing under, or evidenced by, each Deutsche Mark
Revolving Note), (ii) be payable to the order of such Lender and be dated the
Initial Borrowing Date (or if issued thereafter, the date of issuance), (iii) be
in a stated principal amount (expressed in Deutsche Marks) equal to the Deutsche
Mark Equivalent (as of the date of issuance) of the Revolving Loan Commitment of
such Lender; provided that if, because of fluctuations in exchange rates after
the Initial Borrowing Date, the Deutsche Mark Revolving Note of any Lender would
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<PAGE> 24
not be at least as great as the outstanding principal amount of Deutsche Mark
Revolving Loans made by such Lender at any time outstanding, the respective
Lender may request (and in such case the German Borrowers shall promptly execute
and deliver) a new Deutsche Mark Revolving Note in an amount equal to the
Deutsche Mark Equivalent of such Lender's Revolving Loan Commitment on the date
of the issuance of such new Deutsche Mark Revolving Note, (iv) be payable in
Deutsche Marks in the outstanding principal amount of the Deutsche Mark
Revolving Loans evidenced thereby, (v) mature on the Revolving Loan Maturity
Date, (vi) bear interest as provided in the appropriate clause of Section 1.08
in respect of the Deutsche Mark Revolving Loans evidenced thereby, (vii) be
subject to voluntary prepayment as provided in Section 4.01, and mandatory
repayment as provided in Section 4.02 and (viii) be entitled to the benefits of
this Agreement and the other Credit Documents.
(i) The Swingline Note issued to CSFB shall (i) be executed by
the U.S. Borrower, (ii) be payable to the order of CSFB and be dated the Initial
Borrowing Date (or, if issued thereafter, the date of the issuance thereof),
(iii) be in a stated principal amount equal to the Maximum Swingline Amount and
be payable in Dollars in the principal amount of the outstanding Swingline Loans
evidenced thereby from time to time, (iv) mature on the Swingline Expiry Date,
(v) bear interest as provided in the appropriate clause of Section 1.08 in
respect of the Base Rate Loans evidenced thereby, (vi) be subject to voluntary
prepayment as provided in Section 4.01, and mandatory repayment as provided in
Section 4.02 and (vii) be entitled to the benefits of this Agreement and the
other Credit Documents.
(j) Each Lender will note on its internal records the amount of
each Loan made by it and each payment in respect thereof and will prior to any
transfer of any of its Notes endorse on the reverse side thereof the outstanding
principal amount of Loans evidenced thereby. Failure to make any such notation
or any error in such notation shall not affect the U.S. Borrower's or, in the
case of Deutsche Mark Loans, the German Borrowers' obligations in respect of
such Loans.
(k) Notwithstanding anything to the contrary contained above or
elsewhere in this Agreement, Delayed Draw Term Notes, Tranche B Term Notes and
Tranche C Term Notes shall only be delivered to Lenders with Loans of the
respective Tranches which at any time specifically request the delivery of such
Notes. No failure of any Lender to request or obtain a Note evidencing its Loans
of any Tranche shall affect or in any manner impair the obligations of the
respective Borrower or Borrowers to pay the Loans (and all related Obligations)
which would otherwise be evidenced thereby in accordance with the requirements
of this Agreement, and shall not in any way affect the security or guaranties
therefor provided pursuant to the various Credit Documents. Any Lender which
does not have a Note evidencing its outstanding Loans shall in no event be
required to make the notations otherwise described in preceding clause (j). At
any time when any Lender requests the delivery of a Note to evidence its Loans
of any Tranche, the
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<PAGE> 25
respective Borrower or Borrowers shall promptly execute and deliver to the
respective Lender the requested Note or Notes in the appropriate amount or
amounts to evidence such Loans.
1.06 Conversions. The U.S. Borrower (but not in respect of
Deutsche Mark Loans or Swingline Loans) shall have the option to convert, on any
Business Day, all or a portion equal to at least the Minimum Borrowing Amount
for Loans of the respective Type and Tranche into which the respective
conversion is being made, of the outstanding principal amount of Loans made to
the U.S. Borrower, pursuant to one or more Borrowings (so long as of the same
Tranche of Loans) of one or more Types of Loans into a Borrowing (of the same
Tranche of Loans) of either Type of Loan, provided that, (i) except as otherwise
provided in Section 1.10(b), Eurodollar Loans may be converted into Base Rate
Loans only on the last day of an Interest Period applicable to the Loans being
converted and no such partial conversion of Eurodollar Loans shall reduce the
outstanding principal amount of such Eurodollar Loans made pursuant to a single
Borrowing to less than the Minimum Borrowing Amount for Eurodollar Loans of the
respective Tranche, (ii) Base Rate Loans may not be converted into Eurodollar
Loans if any Default or Event of Default exists on the date of conversion
pursuant to Section 10.05, (iii) Base Rate Loans may not be converted into
Eurodollar Loans if any Default under Section 10.01 or any Event of Default is
in existence on the date of the conversion, if the Required Lenders have
previously advised the Administrative Agent that conversions will not be
permitted while said Default of Event of Default remains in existence, (iv)
unless the Administrative Agent otherwise shall have determined that the
Syndication Date has occurred, prior to the 90th day after the Initial Borrowing
Date, conversions of Base Rate Loans into Eurodollar Loans may only be made if
the conversion is effective on the first day of the first, second or third
Interest Period referred to in clause (B) of the proviso to the first sentence
of Section 1.01(a) and so long as such conversion does not result in a greater
number of Borrowings of Eurodollar Loans prior to the earlier of the 90th day
after the Initial Borrowing Date or the Syndication Date than are permitted
under the relevant provisions of Section 1.01 and (v) no conversion pursuant to
this Section 1.06 shall result in a greater number of Borrowings of Eurodollar
Loans than is permitted under Section 1.02. Each such conversion shall be
effected by the U.S. Borrower, by giving the Administrative Agent at its Notice
Office prior to 12:00 Noon at least three Business Days' prior notice (each a
"Notice of Conversion") specifying the Loans to be so converted, the Borrowing
or Borrowings pursuant to which such Loans were made and, if to be converted
into Eurodollar Loans, the Interest Period to be initially applicable thereto.
The Administrative Agent shall give each Lender prompt notice of any such
proposed conversion affecting any of its Loans.
1.07 Pro Rata Borrowings. All Borrowings of U.S. Borrower Tranche
A Term Loans, German Borrower Tranche A Term Loans, Delayed Draw Term Loans,
Tranche B Term Loans and Tranche C Term Loans under this Agreement shall be
incurred from the Lenders pro rata on the basis of their U.S. Borrower Tranche A
Term
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<PAGE> 26
Loan Commitments, German Borrower Tranche A Term Loan Commitments, Delayed Draw
Term Loan Commitments, Tranche B Term Loan Commitments, or Tranche C Term Loan
Commitments, as the case may be. All Borrowings of Dollar Revolving Loans under
this Agreement (including all Mandatory Borrowings) shall be incurred from the
Lenders pro rata on the basis of their RL Percentages. All Borrowings of
Deutsche Mark Revolving Loans under this Agreement shall be incurred from the
German Revolving Lenders pro rata on the basis of their German RL Percentages.
It is understood that no Lender shall be responsible for any default by any
other Lender of its obligation to make Loans hereunder and that each Lender
shall be obligated to make the Loans provided to be made by it hereunder,
regardless of the failure of any other Lender to make its Loans hereunder.
1.08 Interest. (a) The U.S. Borrower hereby severally agrees to
pay interest in respect of the unpaid principal amount of each Base Rate Loan
made to it from the date the proceeds thereof are made available to the U.S.
Borrower until the earlier of (x) the maturity thereof (whether by acceleration,
prepayment or otherwise) and (y) the conversion of such Base Rate Loan to a
Eurodollar Loan pursuant to Section 1.06, at a rate per annum which shall be
equal to the sum of the Applicable Margin plus the Base Rate, each as in effect
from time to time.
(b) The U.S. Borrower hereby severally agrees to pay interest in
respect of the unpaid principal amount of each Eurodollar Loan made to it from
the date the proceeds thereof are made available to such Borrower until the
earlier of (x) the maturity thereof (whether by acceleration, prepayment or
otherwise) and (y) the conversion of such Eurodollar Loan to a Base Rate Loan
pursuant to Section 1.06, 1.09 or 1.10, as applicable, at a rate per annum which
shall, during each Interest Period applicable thereto, be equal to the sum of
the Applicable Margin as in effect from time to time plus the Eurodollar Rate
for such Interest Period.
(c) The German Borrowers hereby jointly and severally agree to
pay interest in respect of the unpaid principal amount of each Deutsche Mark
Loan from the date the proceeds thereof are made available to the German
Borrowers, until the maturity thereof (whether by acceleration, prepayment or
otherwise) at a rate per annum which shall, during each Interest Period
applicable thereto, be equal to the sum of the Applicable Margin as in effect
from time to time plus the Deutsche Mark Euro Rate for such Interest Period;
provided that for the period from the Initial Borrowing Date until the first day
of the first Interest Period applicable to the German Borrower Tranche A Term
Loans pursuant to the relevant provisions of Section 1.01(b) (which in any event
shall occur within six Business Days after the Initial Borrowing Date), the rate
of interest applicable to all outstanding Deutsche Mark Loans shall be deemed to
be 5.75% per annum.
(d) Overdue principal and, to the extent permitted by law,
overdue interest in respect of each Loan and any other overdue amount payable
hereunder shall, in
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each case, bear interest at a rate per annum (1) in the case of overdue
principal of, and interest or other amounts owing with respect to, Deutsche Mark
Loans, equal to 2% per annum in excess of the Applicable Margin (without
reduction for any Interest Reduction Discount) plus the Deutsche Mark Euro Rate
for such successive periods not exceeding three months as the Administrative
Agent may determine from time to time in respect of amounts comparable to the
amount not paid and (2) in all other cases, equal to the greater of (x) 2% per
annum in excess of the rate otherwise applicable to Base Rate Loans of the
respective Tranche (or in the case of amounts which do not relate to a given
Tranche of outstanding Dollar Loans, 2% per annum in excess of the rate
otherwise applicable to Revolving Loans maintained as Base Rate Loans) from time
to time and (y) the rate which is 2% in excess of the rate then borne by such
Loans.
(e) Accrued (and theretofore unpaid) interest shall be payable
(i) in respect of each Base Rate Loan, quarterly in arrears on each Quarterly
Payment Date, (ii) in the case of any Eurodollar Loan, on the date of any
conversion to a Base Rate Loan pursuant to Section 1.06, 1.09 or 1.10, as
applicable (on the amount so converted), (iii) in respect of each Euro Rate
Loan, on the last day of each Interest Period applicable thereto and, in the
case of an Interest Period in excess of three months, on each date occurring at
three month intervals after the first day of such Interest Period and (iv) in
respect of each Loan, on any repayment or prepayment (on the amount repaid or
prepaid), at maturity (whether by acceleration or otherwise) and, after such
maturity, on demand; provided that, in the case of Dollar Revolving Loans
maintained as Base Rate Loans, interest shall not be payable pursuant to
preceding clause (iv) at the time of any repayment or prepayment thereof unless
the respective repayment or prepayment is made in conjunction with a termination
of the Total Revolving Loan Commitment.
(f) Upon each Interest Determination Date, the Administrative
Agent shall determine the respective Euro Rate for the respective Interest
Period or Interest Periods to be applicable to Euro Rate Loans and shall
promptly notify the respective Borrower and the Lenders thereof. Each such
determination shall, absent manifest error, be final and conclusive and binding
on all parties hereto.
1.09 Interest Periods. At the time it gives any Notice of
Borrowing or Notice of Conversion in respect of the making of, or conversion
into, any Euro Rate Loan (in the case of the initial Interest Period applicable
thereto) or on the third Business Day prior to the expiration of an Interest
Period applicable to such Euro Rate Loan (in the case of any subsequent Interest
Period), the respective Borrower or Borrowers shall have the right to elect, by
giving the Administrative Agent notice thereof, the interest period (each an
"Interest Period") applicable to such Euro Rate Loan, which Interest Period
shall, at the option of such Borrower, be a one, two, three or six-month period,
provided that:
(i) all Euro Rate Loans comprising a single Borrowing shall at
all times have the same Interest Period;
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(ii) the initial Interest Period for any Borrowing of Euro Rate
Loans shall commence on the date of such Borrowing (including, in the
case of Dollar Loans, the date of any conversion thereto from a Dollar
Loan of a different Type) or, in the case of Deutsche Mark Loans
incurred on the Initial Borrowing Date (or thereafter but prior to the
first day of the first Interest Period pursuant to Section 1.01), the
date otherwise specified in the relevant provisions of Section 1.01, and
each Interest Period occurring thereafter in respect of such Euro Rate
Loans shall commence on the day on which the next preceding Interest
Period applicable thereto expires;
(iii) if any Interest Period for a Euro Rate Loan begins on a day
for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period, such Interest Period shall end
on the last Business Day of such calendar month;
(iv) if any Interest Period for a Euro Rate Loan would otherwise
expire on a day which is not a Business Day, such Interest Period shall
expire on the next succeeding Business Day; provided, however, that if
any Interest Period for a Euro Rate Loan would otherwise expire on a day
which is not a Business Day but is a day of the month after which no
further Business Day occurs in such month, such Interest Period shall
expire on the next preceding Business Day;
(v) no Interest Period may be selected at any time when a
Default or Event of Default under Section 10.05 is in existence;
(vi) no Interest Period may be selected if any Default or Event
of Default (other than a Default or Event of Default described in
preceding clause (v)) is in existence if the Required Lenders have
previously advised the Administrative Agent that the selection of new
Interest Periods will not be permitted while said Default or Event of
Default remains in existence;
(vii) no Interest Period in respect of any Borrowing of any
Tranche of Loans shall be selected which extends beyond the respective
Maturity Date for such Tranche of Loans; and
(vii) no Interest Period in respect of any Borrowing of Term Loans
of any Tranche shall be selected which extends beyond any date upon
which a mandatory repayment of such Tranche of Term Loans will be
required to be made under Section 4.02(b) if the aggregate principal
amount of Term Loans of such Tranche which have Interest Periods which
will expire after such date will be in excess of the aggregate principal
amount of Term Loans of such Tranche then outstanding less the aggregate
amount of such required repayment.
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Prior to the termination of any Interest Period applicable to
Deutsche Mark Loans, the German Borrowers may, at their option, designate that
the respective Borrowing subject thereto be split into more than one Borrowing
(for purposes of electing multiple Interest Periods to be subsequently
applicable thereto), so long as each such Borrowing resulting from the action
taken pursuant to this sentence meets the Minimum Borrowing Amount for Deutsche
Mark Loans of the respective Tranche. If upon the expiration of any Interest
Period applicable to a Borrowing of Euro Rate Loans, the U.S. Borrower has or,
in the case of Deutsche Mark Loans, the German Borrowers have failed to elect,
or is not permitted to elect, a new Interest Period to be applicable to such
Euro Rate Loans as provided above, such Borrower shall be deemed to have elected
(x) if Eurodollar Loans, to convert such Eurodollar Loans into Base Rate Loans
and (y) if Deutsche Mark Loans, to select a one-month Interest Period for such
Deutsche Mark Loans, in either case effective as of the expiration date of such
current Interest Period.
1.10 Increased Costs, Illegality, etc. (a) In the event that any
Lender shall have determined in good faith (which determination shall, absent
manifest error, be final and conclusive and binding upon all parties hereto but,
with respect to clauses (i) and (iv) below, may be made only by the
Administrative Agent):
(i) on any Interest Determination Date that, by reason of any
changes arising after the date of this Agreement affecting the
applicable interbank market, adequate and fair means do not exist for
ascertaining the applicable interest rate on the basis provided for in
the definition of the respective Euro Rate; or
(ii) at any time, that such Lender shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect
to any Euro Rate Loan because of (x) any change arising after the date
of this Agreement in any applicable law or governmental rule,
regulation, order, guideline or request (whether or not having the force
of law) or in the interpretation or administration thereof and including
the introduction of any new law or governmental rule, regulation, order,
guideline or request, such as, for example, but not limited to: (A) a
change in the basis of taxation of payment to any Lender of the
principal of or interest on the Notes or any other amounts payable
hereunder (except for changes in the rate of tax on, or determined by
reference to, the net income or profits or franchise taxes based on net
income of such Lender pursuant to the laws of the jurisdiction in which
it is organized or in which its principal office or applicable lending
office is located or any subdivision thereof or therein) or (B) a change
in official reserve requirements (except to the extent covered by
Section 1.10(d) in respect of Deutsche Mark Loans or included in the
computation of the Eurodollar Rate) or any special deposit, assessment
or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Lender (or its applicable lending
office) and/or (y) other circumstances since the date of this
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Agreement affecting such Lender or the applicable interbank market or
the position of such Lender in such market; or
(iii) at any time after the date of this Agreement, that the
making or continuance of any Euro Rate Loan has been made (x) unlawful
by any law or governmental rule, regulation or order, (y) impossible by
compliance by any Lender in good faith with any governmental request
(whether or not having force of law) or (z) impracticable as a result of
a contingency occurring after the date of this Agreement which
materially and adversely affects the applicable interbank market; or
(iv) at any time that Deutsche Marks are not available in
sufficient amounts, as determined in good faith by the Administrative
Agent, to fund any Borrowing of Deutsche Mark Loans requested pursuant
to Section 1.01;
then, and in any such event, such Lender (or the Administrative Agent, in the
case of clause (i) or (iv) above) shall promptly give notice (by telephone
promptly confirmed in writing) to the respective Borrower or Borrowers and,
except in the case of clauses (i) and (iv) above, to the Administrative Agent of
such determination (which notice the Administrative Agent shall promptly
transmit to each of the other Lenders). Thereafter (w) in the case of clause (i)
above, (A) in the event that Eurodollar Loans are so affected, Eurodollar Loans
shall no longer be available until such time as the Administrative Agent
notifies the U.S. Borrower and the Lenders that the circumstances giving rise to
such notice by the Administrative Agent no longer exist, and any Notice of
Borrowing or Notice of Conversion given by the U.S. Borrower with respect to
Eurodollar Loans which have not yet been incurred (including by way of
conversion) shall be deemed rescinded by the U.S. Borrower, and (B) in the event
that any Deutsche Mark Loan is so affected, the Deutsche Mark Euro Rate shall be
determined on the basis provided in the proviso to the definition of Deutsche
Mark Euro Rate, (x) in the case of clause (ii) above, the respective Borrower or
Borrowers shall, subject to the provisions of Section 13.21 (to the extent
applicable), pay to such Lender, upon its written request therefor, such
additional amounts (in the form of an increased rate of, or a different method
of calculating, interest or otherwise as such Lender shall determine) as shall
be required to compensate such Lender for such increased costs or reductions in
amounts received or receivable hereunder (a written notice as to the additional
amounts owed to such Lender, showing in reasonable detail the basis for the
calculation thereof, submitted to the respective Borrower or Borrowers by such
Lender shall, absent manifest error, be final and conclusive and binding on all
the parties hereto), (y) in the case of clause (iii) above, the respective
Borrower or Borrowers shall take one of the actions specified in Section 1.10(b)
as promptly as possible and, in any event, within the time period required by
law and (z) in the case of clause (iv) above, Deutsche Mark Loans (exclusive of
Deutsche Mark Loans which have theretofore been funded) shall no longer be
available until such time as the Administrative Agent notifies the German
Borrowers and the Lenders that the circumstances giving rise to
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such notice by the Administrative Agent no longer exists, and any Notice of
Borrowing given by the German Borrowers with respect to such Deutsche Mark Loans
which have not been incurred shall be deemed rescinded by the German Borrowers.
(b) At any time that any Euro Rate Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the respective Borrower
or Borrowers may (and in the case of a Euro Rate Loan affected by the
circumstances described in Section 1.10(a)(iii) shall) either (x) if the
affected Euro Rate Loan is then being made initially or pursuant to a
conversion, cancel the respective Borrowing by giving the Administrative Agent
telephonic notice (confirmed in writing) on the same date that such Borrower was
notified by the affected Lender or the Administrative Agent pursuant to Section
1.10(a)(ii) or (iii) or (y) if the affected Euro Rate Loan is then outstanding,
upon at least three Business Days' written notice to the Administrative Agent,
(A) in the case of a Eurodollar Loan, request the affected Lender to convert
such Eurodollar Loan into a Base Rate Loan and (B) in the case of a Deutsche
Mark Loan, repay such Deutsche Mark Loan in full, provided that, (i) if the
circumstances described in Section 1.10(a)(iii) apply to any Deutsche Mark Loan,
the German Borrowers may, in lieu of taking the actions described above,
maintain such Deutsche Mark Loan outstanding, in which case the Deutsche Mark
Euro Rate shall be determined on the basis provided in the proviso to the
definition of Deutsche Mark Euro Rate, unless the maintenance of such Deutsche
Mark Loan outstanding on such basis would not stop the conditions described in
Section 1.10(iii) from existing (in which case the actions described above,
without giving effect to the proviso, shall be required to be taken) and (ii) if
more than one Lender is affected at any time as described above in this clause
(b), then all affected Lenders must be treated the same pursuant to this Section
1.10(b).
(c) If at any time after the date of this Agreement any Lender
determines that the introduction of or any change (which introduction or change
shall have occurred after the date of this Agreement) in any applicable law or
governmental rule, regulation, order, guideline, directive or request (whether
or not having the force of law) concerning capital adequacy, or any change in
interpretation or administration thereof by any governmental authority, central
bank or comparable agency, will have the effect of increasing the amount of
capital required or expected to be maintained by such Lender or any corporation
controlling such Lender based on the existence of such Lender's Commitments
hereunder or its obligations hereunder, then the Borrowers jointly and severally
agree to pay, subject to the provisions of Section 13.21 (to the extent
applicable), to such Lender, upon its written demand therefor, such additional
amounts as shall be required to compensate such Lender or such other corporation
for the increased cost to such Lender or such other corporation or the reduction
in the rate of return to such Lender or such other corporation as a result of
such increase of capital. In determining such additional amounts, each Lender
will act reasonably and in good faith and will use averaging and attribution
methods which are reasonable, provided that such Lender's determination of
compensation owing under this Section 1.10(c) shall, absent manifest
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<PAGE> 32
error, be final and conclusive and binding on all the parties hereto. Each
Lender, upon determining that any additional amounts will be payable pursuant to
this Section 1.10(c), will give prompt written notice thereof to the Borrowers,
which notice shall show in reasonable detail the basis for calculation of such
additional amounts.
(d) In the event that any Lender shall in good faith determine
(which determination shall, absent manifest error, be final and conclusive and
binding on all parties hereto) at any time that such Lender is required to
maintain reserves (including, without limitation, any marginal, emergency,
supplemental, special or other reserves required by applicable law) which have
been established by any Federal, state, local or foreign court or governmental
agency, authority, instrumentality or regulatory body with jurisdiction over
such Lender (including any branch, Affiliate or funding office thereof) in
respect of any Deutsche Mark Loans or any category of liabilities which includes
deposits by reference to which the interest rate on any Deutsche Mark Loan is
determined or any category of extensions of credit or other assets which
includes loans by a non-United States office of any Lender to non-United States
residents, then, unless such reserves are included in the calculation of the
interest rate applicable to such Deutsche Mark Loans or in Section 1.10(a)(ii),
such Lender shall promptly notify the German Borrowers in writing specifying the
additional amounts required to indemnify such Lender against the cost of
maintaining such reserves (such written notice to provide in reasonable detail a
computation of such additional amounts) and the German Borrowers shall, and
shall be jointly and severally obligated to, pay to such Lender such specified
amounts as additional interest at the time that the German Borrowers are
otherwise required to pay interest in respect of such Deutsche Mark Loan or, if
later, on written demand therefor by such Lender.
1.11 Compensation. The respective Borrower or Borrowers shall,
subject to the provisions of Section 13.21 (to the extent applicable),
compensate each Lender, upon its written request (which request shall set forth
in reasonable detail the basis for requesting such compensation), for all
reasonable losses, expenses and liabilities (including, without limitation, any
loss, expense or liability incurred by reason of the liquidation or reemployment
of deposits or other funds required by such Lender to fund its Euro Rate Loans,
but excluding loss of anticipated profits) which such Lender may sustain: (i) if
for any reason (other than a default by such Lender or the Administrative Agent)
a Borrowing of, or conversion from or into, Euro Rate Loans does not occur on a
date specified therefor in a Notice of Borrowing or Notice of Conversion
(whether or not withdrawn or deemed withdrawn pursuant to Section 1.10(a)); (ii)
if any repayment (including any repayment made pursuant to Section 4.01 or 4.02
or as a result of an acceleration of the Loans pursuant to Section 10) or
conversion of any Euro Rate Loans occurs on a date which is not the last day of
an Interest Period with respect thereto; (iii) if any prepayment of any Euro
Rate Loans is not made on any date specified in a notice of prepayment given by
the respective Borrower or Borrowers; or (iv) as a consequence of (x) any other
default by the respective Borrower or Borrowers to repay its Loans when re-
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quired by the terms of this Agreement or any Note held by such Lender or (y) any
election made pursuant to Section 1.10(b).
1.12 Lending Offices; Changes Thereto. (a) Each Lender may at any
time or from time to time designate, by written notice to the Administrative
Agent to the extent not already reflected on Schedule II, one or more lending
offices (which, for this purpose, may include Affiliates of the respective
Lender) for the various Loans made, and Letters of Credit participated in, by
such Lender (including by designating a separate lending office (or Affiliate)
to act as such with respect to Dollar Loans and U.S. Letter of Credit
Outstandings versus Deutsche Mark Loans and German Letter of Credit
Outstandings); provided that, for designations made after the Initial Borrowing
Date, to the extent such designation shall result in increased costs under
Section 1.10, 2.06 or 4.04 in excess of those which would be charged in the
absence of the designation of a different lending office (including a different
Affiliate of the respective Lender), then the Borrowers shall not be obligated
to pay such excess increased costs (although the Borrowers, in accordance with
and pursuant to the other provisions of this Agreement, shall be obligated to
pay the costs which would apply in the absence of such designation and any
subsequent increased costs of the type described above resulting from changes
after the date of the respective designation). Each lending office and Affiliate
of any Lender designated as provided above shall, for all purposes of this
Agreement, be treated in the same manner as the respective Lender (and shall be
entitled to all indemnities and similar provisions in respect of its acting as
such hereunder).
(b) Each Lender agrees that on the occurrence of any event giving
rise to the operation of Section 1.10(a)(ii) or (iii), Section 1.10(c), Section
1.10(d), Section 2.06 or Section 4.04 with respect to such Lender, it will, if
requested by the applicable Borrower or Borrowers, use reasonable efforts
(subject to overall policy considerations of such Lender) to designate another
lending office for any Loans or Letters of Credit affected by such event,
provided that such designation is made on such terms that such Lender and its
lending office suffer no economic, legal or regulatory disadvantage, with the
object of avoiding the consequence of the event giving rise to the operation of
such Section. Nothing in this Section 1.12 shall affect or postpone any of the
obligations of any Borrower or the right of any Lender provided in Sections
1.10, 2.06 and 4.04.
1.13 Replacement of Lenders. (x) If any Lender becomes a
Defaulting Lender or otherwise defaults in its obligations to make Loans or fund
Unpaid Drawings, (y) upon the occurrence of an event giving rise to the
operation of Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 1.10(d),
Section 2.06 or Section 4.04 with respect to any Lender which results in such
Lender charging to any Borrower increased costs in excess of those being
generally charged by the other Lenders or (z) in the case of the refusal by a
Lender to consent to proposed changes, waivers, discharges or terminations with
respect to this Agreement which have been approved by the Required Lenders as
(and to the
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extent) provided in Section 13.12 (b), the U.S. Borrower shall have the right,
if no Default or Event of Default will exist immediately after giving effect to
such replacement), to either (1) replace such Lender (the "Replaced Lender")
with one or more other Eligible Transferees, none of whom shall constitute a
Defaulting Lender at the time of such replacement (collectively, the
"Replacement Lender") and each of whom shall be required to be reasonably
acceptable to the Administrative Agent or (2) at the option of the U.S.
Borrower, replace only (a) the Revolving Loan Commitment (and outstandings
pursuant thereto and the related German Revolving Loan Sub- Commitment, if any,
of the respective Lender) of the Replaced Lender with an identical Revolving
Loan Commitment (and related outstandings and German Revolving Loan
Sub-Commitment, if any) provided by the Replacement Lender or (b) in the case of
a replacement as provided in Section 13.12(b) where the consent of the
respective Lender is required with respect to less than all Tranches of its
Loans or Commitments, the Commitments and/or outstanding Term Loans of such
Lender in respect of each Tranche where the consent of such Lender would
otherwise be individually required, with identical Commitments and/or Term Loans
of the respective Tranche provided by the Replacement Lender, provided that (i)
any replacement pursuant to this Section 1.13 shall be required to comply with
the requirements of Section 13.04(b) and at the time of any replacement pursuant
to this Section 1.13, the Replacement Lender shall enter into one or more
Assignment and Assumption Agreements pursuant to Section 13.04(b) (and with all
fees payable pursuant to said Section 13.04(b) to be paid by the Replacement
Lender) pursuant to which the Replacement Lender shall acquire all of the
Commitments and outstanding Loans (or, in the case of the replacement of only
(a) the Revolving Loan Commitment, the Revolving Loan Commitment (and related
German Revolving Loan Sub-Commitment, if any) and outstanding Revolving Loans
and partici- pations in Letter of Credit Outstandings and/or (b) the outstanding
Term Loans and/or Term Loan Commitments of the respective Tranche or Tranches)
of, and in each case (except for the replacement of only the outstanding Term
Loans (and/or Term Loan Commitments, as the case may be) of one or more Tranches
of the respective Lender) participations in Letters of Credit by, the Replaced
Lender and, in connection therewith, shall pay to (x) the Replaced Lender in
respect thereof an amount equal to the sum of (I) the principal of, and all
accrued interest on, all outstanding Loans (or of the Loans of the respective
Tranche or Tranches being replaced) of the Replaced Lender, (II) all Unpaid
Drawings that have been funded by (and not reimbursed to) such Replaced Lender,
together with all then unpaid interest with respect thereto at such time and
(III) all accrued, but theretofore unpaid, Fees owing to the Replaced Lender
(but only with respect to the relevant Tranche, in the case of the replacement
of less than all Tranches of Loans then held by the respective Replaced Lender)
pursuant to Section 3.01 and (y) except in the case of the replacement of only
the outstanding Term Loans of one or more Tranches of a Replaced Lender, each
Issuing Bank an amount equal to such Replaced Lender's RL Percentage or German
RL Percentage, as the case may be, of any Unpaid Drawing (which at such time
remains an Unpaid Drawing) to the extent such amount was not theretofore funded
by such Replaced Lender to such Issuing Bank and (ii) all obligations of the
Borrowers due and owing to the Replaced Lender at such time (other
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than those specifically described in clause (i) above in respect of which the
assignment purchase price has been, or is concurrently being, paid) shall be
paid in full to such Replaced Lender concurrently with such replacement. Upon
the execution of the respective Assignment and Assumption Agreements, the
payment of amounts referred to in clauses (i) and (ii) above, recordation of the
assignment on the Register by the Administrative Agent pursuant to Section 13.15
and, if so requested by the Replacement Lender, delivery to the Replacement
Lender of the appropriate Note or Notes executed by the respective Borrowers,
the Replacement Lender shall become a Lender hereunder and, unless the
respective Replaced Lender continues to have outstanding Term Loans or a
Commitment hereunder, the Replaced Lender shall cease to constitute a Lender
hereunder, except with respect to indemnification provisions under this
Agreement (including, without limitation, Sections 1.10, 1.11, 2.06, 4.04, 12.06
and 13.01), which shall survive as to such Replaced Lender. In connection with
any replacement of Lenders pursuant to, and as contemplated by, this Section
1.13, each of the German Borrowers hereby irrevocably authorizes the U.S.
Borrower to take all necessary action, in the name of the German Borrowers, as
described above in this Section 1.13 in order to effect the replacement of the
respective Lender or Lenders in accordance with the preceding provisions of this
Section 1.13.
SECTION 2. Letters of Credit.
2.01 Letters of Credit. (a) Subject to and upon the terms and
conditions set forth herein, the U.S. Borrower or the German Borrowers may
request that any Issuing Bank issue, at any time and from time to time on and
after the Initial Borrowing Date and prior to the fifth Business Day prior to
the Revolving Loan Maturity Date (or the 30th day prior to the Revolving Loan
Maturity Date in the case of Trade Letters of Credit), (x) for the account of
the U.S. Borrower (in the case of requests made by it) or for the joint and
several account of the German Borrowers (in the case of requests made by them)
and for the benefit of any holder (or any trustee, agent or other similar
representative for any such holders) of L/C Supportable Obligations of the
respective such Account Party or any of its or their Subsidiaries, an
irrevocable sight standby letter of credit, in a form customarily used by such
Issuing Bank or in such other form as has been approved by such Issuing Bank
(each such standby letter of credit, a "Standby Letter of Credit") in support of
such L/C Supportable Obligations and (y) for the account of the respective such
Account Party and for the benefit of sellers of goods, materials and services
used in the ordinary course of business of the respective such Account Party or
any of its or their Subsidiaries an irrevocable sight commercial letter of
credit in a form customarily used by such Issuing Bank or in such other form as
has been approved by such Issuing Bank (each such commercial letter of credit, a
"Trade Letter of Credit", and each such Trade Letter of Credit and each Standby
Letter of Credit, a "Letter of Credit") in support of commercial transactions of
the respective such Account Party and its or their Subsidiaries.
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(b) All (x) U.S. Letters of Credit shall be issued, and
denominated, in Dollars, and shall be issued for the account of the U.S.
Borrower, and (y) German Letters of Credit shall be issued, and denominated, in
Deutsche Marks (or, in any specific instance, such other currency as is
acceptable to the Administrative Agent and the respective Issuing Bank), and
shall be issued for the joint and several account of each of the German
Borrowers. Notwithstanding anything to the contrary contained above, in no event
shall a German Letter of Credit denominated in a currency other than Deutsche
Marks be issued if, after giving effect to such issuance, the aggregate amount
of Letter of Credit Outstandings at such time in respect of German Letters of
Credit issued in currencies other than Deutsche Marks would exceed $5,000,000.
(c) Each Issuing Bank hereby agrees that it will (subject to the
terms and conditions contained herein), at any time and from time to time on and
after the Initial Borrowing Date and prior to the fifth Business Day prior to
the Revolving Loan Maturity Date (or the 30th day prior to the Revolving Loan
Maturity Date in the case of Trade Letters of Credit), following its receipt of
the respective Letter of Credit Request, issue for the account of the respective
Account Party, subject to the terms and conditions of this Agreement, one or
more Letters of Credit (x) in the case of Standby Letters of Credit, in support
of such L/C Supportable Obligations of the respective Account Party or any of
its or their Subsidiaries as are permitted to remain outstanding without giving
rise to a Default or an Event of Default and (y) in the case of Trade Letters of
Credit, in support of sellers of goods or materials used in the ordinary course
of business of the respective Account Party or any of its or their Subsidiaries
as referenced in Section 2.01(a), provided that the respective Issuing Bank
shall be under no obligation to issue any Letter of Credit of the types
described above if at the time of such issuance:
(i) any order, judgment or decree of any governmental authority
or arbitrator shall purport by its terms to enjoin or restrain such
Issuing Bank from issuing such Letter of Credit or any requirement of
law applicable to such Issuing Bank or any request or directive (whether
or not having the force of law) from any governmental authority with
jurisdiction over such Issuing Bank shall prohibit, or request that such
Issuing Bank refrain from, the issuance of letters of credit generally
or such Letter of Credit in particular or shall impose upon such Issuing
Bank with respect to such Letter of Credit any restriction or reserve or
capital requirement (for which such Issuing Bank is not otherwise
compensated) not in effect on the date hereof, or any unreimbursed loss,
cost or expense which was not applicable, in effect or known to such
Issuing Bank as of the date hereof and which such Issuing Bank
reasonably and in good faith deems material to it; or
(ii) such Issuing Bank shall have received notice from the
Administrative Agent at the direction of the Required Lenders prior to
the issuance of such Letter of Credit of the type described in the
second sentence of Section 2.03(b).
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2.02 Maximum Letter of Credit Outstandings; Final Maturities. (a)
Notwithstanding anything to the contrary contained in this Agreement, (i) no
Letter of Credit shall be issued the Stated Amount of which, when added to the
Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid on
the date of, and prior to the issuance of, the respective Letter of Credit) at
such time, would exceed either (x) $25,000,000 or (y) when added to the
aggregate principal amount of all Revolving Loans (for this purpose, using the
Dollar Equivalent of each outstanding Deutsche Mark Revolving Loan) then
outstanding and the aggregate amount of all Swingline Loans then outstanding,
the Total Revolving Loan Commitment at such time, (ii) no U.S. Letter of Credit
shall be issued the Stated Amount (expressed in Dollars) of which, when added to
the U.S. Letter of Credit Outstandings (expressed in Dollars) (exclusive of
Unpaid Drawings with respect thereto which are repaid on the date of, and prior
to the issuance of, the respective U.S. Letter of Credit) at such time would
exceed, when added to the aggregate principal of all Dollar Revolving Loans
(expressed in Dollars) then outstanding and the aggregate amount of all
Swingline Loans then outstanding, the U.S. Borrowing Base, (iii) no German
Letter of Credit shall be issued the Stated Amount (expressed in Deutsche Marks
(taking the Deutsche Mark Equivalent of any amount expressed in currencies other
than Deutsche Marks)) of which, when added to the German Letter of Credit
Outstandings (expressed in Deutsche Marks) (exclusive of Unpaid Drawings with
respect thereto which are repaid on the date of, and prior to the issuance of,
the respective German Letter of Credit) at such time and the aggregate principal
of all Deutsche Mark Revolving Loans (expressed in Deutsche Marks) then
outstanding, would exceed the German Borrowing Base at such time, (iv) no German
Letter of Credit shall be issued the Stated Amount of which, when added to the
German Letter of Credit Outstandings (exclusive of Unpaid Drawings with respect
thereto which are repaid on the date, and prior to the issuance of, the
respective German Letter of Credit) at such time and the aggregate principal
amount of all Deutsche Mark Revolving Loans (taking the Dollar Equivalent
thereof) then outstanding, would exceed the lesser of (x) the Total German
Revolving Loan Sub-Commitment at such time, and (y) $15,000,000, and (v) each
Letter of Credit shall by its terms terminate (A) in the case of Standby Letters
of Credit, on or before the earlier of (x) the date which occurs 12 months after
the date of the issuance thereof (although any such Standby Letter of Credit may
be extendable for successive periods of up to 12 months (which period may be
increased by not more than one month to the extent needed to permit the
effectiveness of any extension to occur up to one month prior to the then
scheduled termination of the respective Standby Letter of Credit), but not
beyond the fifth Business Day prior to the Revolving Loan Maturity Date, on
terms acceptable to the Issuing Bank thereof) and (y) the fifth Business Day
prior to the Revolving Loan Maturity Date and (B) in the case of Trade Letters
of Credit, on or before the earlier of (x) the date which occurs 180 days after
the date of issuance thereof and (y) 30 days prior to the Revolving Loan
Maturity Date.
(b) Notwithstanding the foregoing, in the event a Lender Default
exists, the Issuing Bank shall not be required to issue any Letter of Credit
unless the Issuing Bank
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has entered into arrangements satisfactory to it and the respective Account
Party to eliminate the Issuing Bank's risk with respect to the participation in
Letters of Credit of the Defaulting Lender or Lenders, including by cash
collateralizing (in Dollars or Deutsche Marks, as appropriate) such Defaulting
Lender's or Lenders' RL Percentage of the Letter of Credit Outstandings.
2.03 Letter of Credit Requests; Notices of Issuance; Minimum
Stated Amount. (a) Whenever the U.S. Borrower or the German Borrowers, as the
case may be, desire that a Letter of Credit be issued for its or their account,
the respective such Account Party shall give the Administrative Agent (at the
appropriate Notice Office) and the respective Issuing Bank at least five
Business Days' (or such shorter period as is acceptable to the respective
Issuing Bank) written notice thereof. Each notice shall be in the form of
Exhibit C (each a "Letter of Credit Request").
(b) The making of each Letter of Credit Request shall be deemed
to be a representation and warranty by the U.S. Borrower or the German
Borrowers, as the case may be, that (i) such Letter of Credit may be issued in
accordance with, and will not violate the requirements of, Section 2.02 and (ii)
all of the applicable conditions set forth in Section 5 and 6 shall be met at
the time of such issuance. Unless the respective Issuing Bank has received
notice from the Administrative Agent at the direction of the Required Lenders
before it issues a Letter of Credit that one or more of the conditions specified
in Section 5 are not satisfied on the Initial Borrowing Date or Section 6 are
not then satisfied, or that the issuance of such Letter of Credit would violate
Section 2.02, then such Issuing Bank may issue the requested Letter of Credit
for the account of the respective Account Party in accordance with such Issuing
Bank's usual and customary practices. Upon the issuance of or amendment or
modification to any Standby Letter of Credit, the respective Issuing Bank shall
promptly notify the Administrative Agent (and the Administrative Agent shall
promptly forward such notice to the Lenders) of such issuance, amendment or
modification and such notification shall be accompanied by a copy of the issued
Standby Letter of Credit or amendment or modification. For Trade Letters of
Credit, the Issuing Bank will send to the Administrative Agent by facsimile
transmission, promptly on the first Business Day of each week and on each
Quarterly Payment Date, the daily aggregate Stated Amount of Trade Letters of
Credit issued by such Issuing Bank and outstanding during the preceding week or
quarterly period, as the case may be. The Administrative Agent shall deliver to
each Lender, after each calendar month end and upon each payment of the Letter
of Credit Fee, a report setting forth for the relevant period the daily
aggregate Stated Amount of all outstanding Trade Letters of Credit during such
period.
(c) Each Issuing Bank shall, on the date of issuance of a Letter
of Credit by it, give the Administrative Agent and the respective Account Party
written notice of the issuance of such Letter of Credit, accompanied by a copy
to the Administrative Agent of the Letter of Credit or Letters of Credit issued
by it.
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(d) The initial Stated Amount of each Letter of Credit shall not
be less than (x) in the case of U.S. Letters of Credit, $10,000 and (y) in the
case of German Letters of Credit, DM20,000, or in each case such lesser amount
as is acceptable to the respective Issuing Bank.
2.04 Letter of Credit Participations. (a) Immediately upon the
issuance by the respective Issuing Bank of any Letter of Credit, such Issuing
Bank shall be deemed to have sold and transferred to (x) in the case of a U.S.
Letter of Credit, each Lender (other than such Issuing Bank) with a Revolving
Loan Commitment and (y) in the case of a German Letter of Credit, each Lender
(other than such Issuing Bank) with a German Revolving Loan Sub-Commitment (each
such Lender with respect to any Letter of Credit, in its capacity under this
Section 2.04, a "Participant"), and each such Participant shall be deemed
irrevocably and unconditionally to have purchased and received from such Issuing
Bank, without recourse or warranty, an undivided interest and participation, in
a percentage equal to such Participant's RL Percentage, in the case of a U.S.
Letter of Credit, or German RL Percentage, in the case of a German Letter of
Credit, in such Letter of Credit, each drawing or payment made thereunder and
the obligations of the respective Account Party under this Agreement with
respect thereto, and any security therefor or guaranty pertaining thereto
(although Letter of Credit Fees shall be paid directly to the Administrative
Agent for the ratable account of the Lenders based on their RL Percentages or
German RL Percentages, as the case may be, as provided in Section 3.01(c) and
the Participants shall have no right to receive any portion of any Facing Fees).
Upon any change in the Revolving Loan Commitments or RL Percentages or German RL
Percentages of the Lenders pursuant to this Agreement, it is hereby agreed that,
with respect to all outstanding Letters of Credit and Unpaid Drawings, there
shall be an automatic adjustment to the participations pursuant to this Section
2.04 to reflect the new RL Percentages or German RL Percentages, as the case may
be, of the various Lenders.
(b) In determining whether to pay under any Letter of Credit, the
respective Issuing Bank shall have no obligation relative to the other Lenders
other than to confirm that any documents required to be delivered under such
Letter of Credit appear to have been delivered and that they appear to
substantially comply on their face with the requirements of such Letter of
Credit. Any action taken or omitted to be taken by any Issuing Bank under or in
connection with any Letter of Credit if taken or omitted in the absence of gross
negligence or willful misconduct, shall not create for such Issuing Bank any
resulting liability to any Account Party, any other Credit Party, any Lender or
any other Person.
(c) In the event that any Issuing Bank makes any payment under
any Letter of Credit and the respective Account Party shall not have reimbursed
such amount in full to such Issuing Bank pursuant to Section 2.05(a), such
Issuing Bank shall promptly notify the Administrative Agent, which shall
promptly notify each Participant of such failure, and each Participant shall
promptly and unconditionally pay to such Issuing Bank
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the amount of such Participant's RL Percentage (in the case of a U.S. Letter of
Credit) or German RL Percentage (in the case of a German Letter of Credit) of
such unreimbursed payment (in the case of payments made in any currency other
than Dollars, taking the Dollar Equivalent thereof) in Dollars and in same day
funds. If the Administrative Agent so notifies, prior to 11:00 A.M. (New York
time) on any Business Day, any Participant required to fund a payment under a
Letter of Credit, such Participant shall make available to the Administrative
Agent for the benefit of such Issuing Bank, in Dollars, such Participant's RL
Percentage (in the case of a U.S. Letter of Credit) or German RL Percentage (in
the case of a German Letter of Credit) of the amount of such payment (or, in the
case of payments made in any currency other than Dollars, the Dollar Equivalent
thereof) on such Business Day in same day funds. If and to the extent such
Participant shall not have so made its RL Percentage or German RL Percentage, as
the case may be, of the amount of such payment available to the Administrative
Agent for the benefit of such Issuing Bank, such Participant agrees to pay to
the Administrative Agent for the benefit of such Issuing Bank, forthwith on
demand such amount, together with interest thereon, for each day from such date
until the date such amount is paid to the Administrative Agent for the benefit
of such Issuing Bank at the overnight Federal Funds Rate for the first three
days and at the interest rate applicable to Dollar Revolving Loans maintained as
Base Rate Loans hereunder for each day thereafter. The failure of any
Participant to make available to such Issuing Bank its RL Percentage or German
RL Percentage, as the case may be, of any payment under any Letter of Credit
shall not relieve any other Participant of its obligation hereunder to make
available to such Issuing Bank its RL Percentage or German RL Percentage, as the
case may be, of any unreimbursed payment with respect to a Letter of Credit on
the date required, as specified above, but no Participant shall be responsible
for the failure of any other Participant to make available to the Administrative
Agent for the benefit of such Issuing Bank such other Participant's RL
Percentage or German RL Percentage, as the case may be, of any such payment.
(d) Whenever any Issuing Bank receives a payment of a
reimbursement obligation as to which it has received any payments from the
Participants pursuant to clause (c) above, such Issuing Bank shall pay to the
Administrative Agent for the benefit of each Participant which has paid its RL
Percentage or German RL Percentage, as the case may be, thereof, in Dollars and
in same day funds, an amount equal to such Participant's share (based upon the
proportionate aggregate amount originally funded by such Participant to the
aggregate amount funded by all Participants) of the principal amount of such
reimbursement obligation and interest thereon accruing after the purchase of the
respective participations.
(e) Upon the request of any Participant, each Issuing Bank shall
furnish to such Participant copies of any Letter of Credit issued by it and such
other documentation as may reasonably be requested by such Participant.
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(f) The obligations of the Participants to make payments to the
Administrative Agent for the benefit of each Issuing Bank with respect to
Letters of Credit issued by it shall be irrevocable and not subject to any
qualification or exception whatsoever and shall be made in accordance with the
terms and conditions of this Agreement under all circumstances, including,
without limitation, any of the following circumstances:
(i) any lack of validity or enforceability of this Agreement or
any of the other Credit Documents;
(ii) the existence of any claim, setoff, defense or other right
which the respective Revolving Loan Borrower or any of its Subsidiaries
or Affiliates may have at any time against a beneficiary named in a
Letter of Credit, any transferee of any Letter of Credit (or any Person
for whom any such transferee may be acting), the Administrative Agent,
any Participant, or any other Person, whether in connection with this
Agreement, any Letter of Credit, the transactions contemplated herein or
any unrelated transactions (including any underlying transaction between
the respective Account Party or any Subsidiary or Affiliate of the
respective Account Party and the beneficiary named in any such Letter of
Credit);
(iii) any draft, certificate or any other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Credit
Documents; or
(v) the occurrence of any Default or Event of Default.
2.05 Agreement to Repay Letter of Credit Drawings. (a) The U.S.
Borrower hereby agrees, in the case of all U.S. Letters of Credit, and the
German Borrowers hereby jointly and severally agree, in the case of all German
Letters of Credit, to reimburse the respective Issuing Bank, by making payment
in Dollars directly to the Administrative Agent for the benefit of such Issuing
Bank, for any payment or disbursement (or, in the case of payments or
disbursements made in any currency other than Dollars, the Dollar Equivalent
thereof) made by such Issuing Bank under any Letter of Credit issued for the
account of the respective Account Party (with each such amount so paid, until
reimbursed, an "Unpaid Drawing"), immediately after, and in any event on the
date of, such payment or disbursement, with interest on the amount so paid or
disbursed by such Issuing Bank, to the extent not reimbursed prior to 2:00 P.M.
(New York time or, in the case of German Letters of Credit, Frankfurt time) on
the date of such payment or disbursement, from and including the date paid or
disbursed to but excluding the date
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such Issuing Bank was reimbursed by the U.S. Borrower or the respective German
Borrower, as the case may be, therefor at a rate per annum which shall be the
Base Rate in effect from time to time plus the Applicable Margin for Revolving
Loans maintained as Base Rate Loans; provided, however, to the extent such
amounts are not reimbursed prior to 12:00 Noon (New York time or, in the case of
German Letters of Credit, Frankfurt time) on the third Business Day following
the receipt by the respective Account Party of notice of such payment or
disbursement or upon the occurrence of a Default or an Event of Default under
Section 10.05, interest shall thereafter accrue on the amounts so paid or
disbursed by such Issuing Bank (and until reimbursed by the respective Account
Party at a rate per annum which shall be the Base Rate in effect from time to
time plus the Applicable Margin for Revolving Loans maintained as Base Rate
Loans plus 2%, in each such case, with interest to be payable on demand. The
respective Issuing Bank shall give the respective Account Party prompt written
notice of each Drawing under any Letter of Credit, provided that the failure to
give any such notice shall in no way affect, impair or diminish the respective
Account Party's obligations hereunder.
(b) The obligations of the U.S. Borrower (with respect to U.S.
Letters of Credit) and the joint and several obligations of the German Borrowers
(with respect to German Letters of Credit) under this Section 2.05 to reimburse
the respective Issuing Bank with respect to Unpaid Drawings (including, in each
case, interest thereon) shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
which the respective Account Party may have or have had against any Lender
(including in its capacity as issuer of the Letter of Credit or as Participant),
including, without limitation, any defense based upon the failure of any drawing
under a Letter of Credit (each a "Drawing") to conform to the terms of the
Letter of Credit or any nonapplication or misapplication by the beneficiary of
the proceeds of such Drawing; provided that any reimbursement made by the
respective Account Party, shall be without prejudice to any claim it may have
against such Issuing Bank as a result of such Issuing Bank's gross negligence or
willful misconduct in determining whether any documents required to be delivered
under the respective Letter of Credit appear to have been delivered and that
they appear to substantially comply on their face with the requirements of the
respective Letter of Credit.
2.06 Increased Costs. If at any time after the date of this
Agreement, the introduction of or any change in any applicable law, rule,
regulation, order, guideline or request or in the interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance by any Issuing Bank or
any Participant with any request or directive by any such authority (whether or
not having the force of law), shall either (i) impose, modify or make applicable
any reserve, deposit, capital adequacy or similar requirement against letters of
credit issued by any Issuing Bank or participated in by any Participant, or (ii)
impose on any Issuing Bank or any Participant any other conditions relating,
directly or indirectly, to this Agreement; and the result of any of the
foregoing is to increase the cost to any Issuing Bank or any
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<PAGE> 43
Participant of issuing, maintaining or participating in any Letter of Credit, or
reduce the amount of any sum received or receivable by any Issuing Bank or any
Participant hereunder or reduce the rate of return on its capital with respect
to Letters of Credit (except for changes in the rate of tax on, or determined by
reference to, the net income or profits or franchise taxes based on net income
of such Issuing Bank or such Participant pursuant to the laws of the
jurisdiction in which it is organized or in which its principal office or
applicable lending office is located or any subdivision thereof or therein),
then, upon written demand to the U.S. Borrower or the German Borrowers, as the
case may be, by such Issuing Bank or any Participant (a copy of which
certificate shall be sent by such Issuing Bank or such Participant to the
Administrative Agent), the U.S. Borrower or the German Borrowers, as the case
may be, shall, subject to the provisions of Section 13.21 (to the extent
applicable), pay to such Issuing Bank or such Participant such additional amount
or amounts as will compensate such Lender for such increased cost or reduction
in the amount receivable or reduction on the rate of return on its capital. Any
Issuing Bank or any Participant, upon determining that any additional amounts
will be payable pursuant to this Section 2.06, will give prompt written notice
thereof to the U.S. Borrower or the German Borrowers, as the case may be, which
notice shall include a certificate submitted to the U.S. Borrower or the German
Borrowers, as the case may be, by such Issuing Bank or such Participant (a copy
of which certificate shall be sent by such Issuing Bank or such Participant to
the Administrative Agent), setting forth in reasonable detail the basis for the
calculation of such additional amount or amounts necessary to compensate such
Issuing Bank or such Participant. The certificate required to be delivered
pursuant to this Section 2.06 shall, absent manifest error, be final and
conclusive and binding on the U.S. Borrower or the German Borrowers, as the case
may be.
SECTION 3. Commitment Commission; Fees; Reductions of
Commitment.
3.01 Fees. (a) The U.S. Borrower agrees to pay to the
Administrative Agent for distribution to each Non-Defaulting Lender with a Term
Loan Commitment, a commitment commission (the "Term Loan Commitment Commission")
for the period from and including the Effective Date to but excluding the date
on which the Total Term Loan Commitment shall have been terminated, computed at
a rate for each day equal to the Applicable Commitment Commission Percentage on
the daily average sum of the Term Loan Commitments of such Lender. Accrued Term
Loan Commitment Commission shall be due and payable on the Initial Borrowing
Date, quarterly in arrears on each Quarterly Payment Date and on the date on
which the Total Term Loan Commitments shall have been terminated.
(b) The Revolving Loan Borrowers jointly and severally agree to
pay to the Administrative Agent in Dollars for distribution to each
Non-Defaulting Lender with a Revolving Loan Commitment a commitment commission
(the "Revolving Loan Commitment Commission") for the period from and including
the Effective Date to but
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<PAGE> 44
excluding the Revolving Loan Maturity Date (or such earlier date as the Total
Revolving Loan Commitment shall have been terminated), computed at a rate for
each day equal to the Applicable Commitment Commission Percentage on the daily
average Unutilized Revolving Loan Commitment of such Lender. Accrued Revolving
Loan Commitment Commission shall be due and payable quarterly in arrears on each
Quarterly Payment Date and on the Revolving Loan Maturity Date or such earlier
date upon which the Total Revolving Loan Commitment is terminated.
(c) The U.S. Borrower agrees to pay to the Administrative Agent
for distribution to each Lender with a Revolving Loan Commitment (based on their
respective RL Percentages) in Dollars a fee in respect of each U.S. Letter of
Credit issued hereunder, and the German Borrowers jointly and severally agree to
pay to the Administrative Agent for distribution to each Lender with a German
Revolving Loan Sub-Commitment (based on their respective German RL Percentages)
in Dollars a fee in respect of each German Letter of Credit issued hereunder
(with all fees payable as described in this clause (c) being herein referred to
as "Letter of Credit Fees"), in each case for the period from and including the
date of issuance of the respective Letter of Credit to and including the date of
termination of such Letter of Credit (or, in the case of a Trade Letter of
Credit, the date of the stated expiration thereof), computed at a rate per annum
equal to the Applicable Margin for Revolving Loans maintained as Eurodollar
Loans on the daily average Stated Amount of such Letter of Credit. Accrued
Letter of Credit Fees shall be due and payable by the respective Account Party
quarterly in arrears on each Quarterly Payment Date and on the first day after
the termination of the Total Revolving Loan Commitment upon which no Letters of
Credit remain outstanding.
(d) The U.S. Borrower agrees, and the German Borrowers jointly
and severally agree, to pay to each Issuing Bank, for its own account, in
Dollars, a facing fee in respect of each Letter of Credit issued by such Issuing
Bank for the account of such Account Party (the "Facing Fee"), for the period
from and including the date of issuance of such Letter of Credit to and
including the date of the termination of such Letter of Credit, computed at a
rate equal to 1/4 of 1% per annum of the daily average Stated Amount of such
Letter of Credit. Accrued Facing Fees shall be due and payable quarterly in
arrears on each Quarterly Payment Date and upon the first day after the
termination of the Total Revolving Loan Commitment upon which no Letter of
Credit remains outstanding.
(e) The respective Account Party shall pay, upon each payment
under, issuance of, or amendment to, any Letter of Credit, such amount as shall
at the time of such event be the administrative charge and the reasonable
expenses which the applicable Issuing Bank is generally imposing in connection
with such occurrence with respect to letters of credit denominated in the
respective Applicable Currency.
(f) The Borrowers shall pay to the Administrative Agent, for its
own
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<PAGE> 45
account, such other fees as have been agreed to in writing by the Borrowers and
the Administrative Agent.
3.02 Voluntary Termination of Unutilized Commitments. Upon at
least three Business Days' prior notice to the Administrative Agent at its
Notice Office (which notice the Administrative Agent shall promptly transmit to
each of the Lenders), the U.S. Borrower shall have the right, at any time or
from time to time, without premium or penalty, to terminate the Total Unutilized
Revolving Loan Commitment, in whole or in part, in integral multiples of
$500,000 in the case of partial reductions to the Total Unutilized Revolving
Loan Commitment. Each reduction to the Total Unutilized Revolving Loan
Commitment pursuant to this Section 3.02 shall apply (i) first, in an amount
equal to the lesser of the reduction to the Total Unutilized Revolving Loan
Commitment then being effected or the Total Non-German Revolving Loan Sub-
Commitment then in effect, to reduce the Revolving Loan Commitment (and the Non-
German Revolving Loan Sub-Commitment) of each Lender, pro rata based on the
relative Non-German Revolving Loan Sub-Commitments of the various Lenders (or
their respective Affiliates) and (ii) to the extent in excess of the amount to
be applied pursuant to preceding clause (i), to reduce the remaining Revolving
Loan Commitments (and the German Revolving Loan Sub-Commitments) of the various
Lenders pro rata based on the German Revolving Loan Sub-Commitments of the
various Lenders. Notwithstanding anything to the contrary contained in the
immediately preceding sentence, at the time of any reduction to the Total
Unutilized Revolving Loan Commitment pursuant to this Section 3.02, the U.S.
Borrower may, but shall not be required to, elect that all or portion of such
reduction first be applied as provided in clause (ii) of the immediately
preceding sentence, with any excess over the amount of the Total German
Revolving Loan Sub-Commitment as then in effect to be applied as provided in
clause (i) of the immediately preceding sentence.
3.03 Mandatory Reduction of Commitments. (a) The Total
Commitments (and the U.S. Borrower Tranche A Term Loan Commitment, the German
Borrower Tranche A Term Loan Commitment, the Delayed Draw Term Loan Commitment,
the Tranche B Term Loan Commitment, the Tranche C Term Loan Commitment, the
Revolving Loan Commitment, the German Revolving Loans Sub-Commitment and the
Non-German Revolving Loans Sub-Commitment of each Lender) shall terminate in
their entirety on September 30, 1997 unless the Initial Borrowing Date has
occurred on or before such date.
(b) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total U.S. Borrower Tranche A Term Loan
Commitment shall (i) be reduced on the Initial Borrowing Date (after giving
effect to the making of U.S. Borrower Tranche A Term Loans on such date), in an
amount equal to the aggregate principal amount of U.S. Borrower Tranche A Term
Loans incurred on such date, (ii) terminate in its entirety (to the extent not
theretofore terminated) at 5:00 P.M. (New York
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<PAGE> 46
time) on the earlier to occur of the PIK Preferred Drawdown Date (after giving
effect to the making of U.S. Borrower Tranche A Term Loans on such date) or the
U.S. Borrower Tranche A Term Loan Commitment Termination Date, whether or not
any U.S. Borrower Tranche A Term Loans are incurred on such date and (iii) prior
to the termination of the Total U.S. Borrower Tranche A Term Loan Commitment, be
reduced from time to time to the extent required by Section 4.02.
(c) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total German Borrower Tranche A Term Loan
Commitment shall (i) terminate in its entirety (to the extent not theretofore
terminated) at 5:00 P.M. (New York time) on the Initial Borrowing Date (after
giving effect to the making of German Borrower Tranche A Term Loans on such
date) and (ii) prior to the termination of the Total German Borrower Tranche A
Term Loan Commitment, be reduced from time to time to the extent required by
Section 4.02.
(d) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Delayed Draw Term Loan Commitment shall
(i) be reduced on each Delayed Draw Term Loan Borrowing Date (after giving
effect to the making of Delayed Draw Term Loans on such date), in the amount
equal to the aggregate principal amount of Delayed Draw Term Loans incurred on
such date, (ii) terminate in its entirety (to the extent not theretofore
terminated) at 5:00 P.M. (New York time) on the Delayed Draw Term Loan
Commitment Termination Date, whether or not any Delayed Draw Term Loans are
incurred on such date and (iii) prior to the termination of the Total Delayed
Draw Term Loan Commitment, be reduced from time to time to the extent required
by Section 4.02.
(e) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Tranche B Term Loan Commitment shall
(i) be reduced on the Initial Borrowing Date (after giving effect to the making
of Tranche B Term Loans on such date), in an amount equal to the aggregate
principal amount of Tranche B Term Loans incurred on such date, (ii) terminate
in its entirety (to the extent not theretofore terminated) at 5:00 P.M. (New
York time) on the earlier to occur of the PIK Preferred Drawdown Date (after
giving effect to the making of Tranche B Term Loans on such date) or the Tranche
B Term Loan Commitment Termination Date, whether or not any Tranche B Term Loans
are incurred on such date and (iii) prior to the termination of the Total
Tranche B Term Loan Commitment, be reduced from time to time to the extent
required by Section 4.02.
(f) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Tranche C Term Loan Commitment shall
(i) be reduced on the Initial Borrowing Date (after giving effect to the making
of Tranche C Term Loans on such date), in an amount equal to the aggregate
principal amount of Tranche C Term Loans incurred on such date, (ii) terminate
in its entirety (to the extent not theretofore
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<PAGE> 47
terminated) at 5:00 P.M. (New York time) on the earlier to occur of the PIK
Preferred Drawdown Date (after giving effect to the making of Tranche C Term
Loans on such date) or the Tranche C Term Loan Commitment Termination Date,
whether or not any Tranche C Term Loans are incurred on such date and (iii)
prior to the termination of the Total Tranche C Term Loan Commitment, be reduced
from time to time to the extent required by Section 4.02.
(g) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Revolving Loan Commitment (and the
Revolving Loan Commitment, the German Revolving Loan Sub-Commitment and the
Non-German Revolving Loan Sub-Commitment of each Lender) shall terminate in its
entirety on the earlier to occur of (x) the date (if any) after the Initial
Borrowing Date and occurring on or prior to the Subsidiary Stock Restrictions
Approval Date, upon which any Lien is created with respect to, or any
disposition occurs with respect to, any capital stock of any Subsidiary of the
U.S. Borrower identified in the definition of "Subsidiary Stock Restrictions"
contained herein if such Lien or disposition, as the case may be, would not be
permitted if the Subsidiary Stock Restrictions contained in this Agreement were
then effective in accordance with the terms thereof had the Subsidiary Stock
Restrictions Approval Date theretofore occurred and (y) the Revolving Loan
Maturity Date.
(h) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, on the Initial Borrowing Date (but immediately
before the making of any Loans pursuant to this Agreement) to the extent that
any of the U.S. Borrower's Existing Senior Secured Notes have not been accepted
for purchase pursuant to the Existing Senior Secured Notes Tender Offer, an
amount equal to the amount which would have been paid to repurchase all such
Existing Senior Secured Notes not tendered pursuant to the Existing Senior
Secured Notes Tender Offer (if same had been tendered pursuant thereto), but
only if such amount exceeds $250,000, shall be applied to reduce the Total U.S.
Borrower Tranche A Term Loan Commitment, the Total Tranche B Term Loan
Commitment and the Total Tranche C Term Loan Commitment on a pro rata basis
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<PAGE> 48
(based upon the relative amounts of such Commitments before giving effect to the
reduction thereto pursuant to this sentence) (with the aggregate amount of
commitment reductions pursuant to this sentence being herein called the
"Existing Senior Secured Notes Reduction Amount"). Furthermore, on the Initial
Borrowing Date (but immediately before the making of any Loans pursuant to this
Agreement) (i) to the extent that less than an amount equal to $275 million less
the Existing Senior Secured Notes Reduction Amount is to be used, on the Initial
Borrowing Date or within 45 days thereafter, to effect the Refinancing
(excluding (i) the uses made or to be made with proceeds available under the
Delayed Draw Term Loan Facility and (ii) payments of fees in connection herewith
and in connection with the Refinancing, but including amounts to be used to
redeem the Existing PIK Preferred Stock), an amount equal to such difference
shall be applied to reduce the Total U.S. Borrower Tranche A Term Loan
Commitment, the Total Tranche B Term Loan Commitment and the Total Tranche C
Term Loan Commitment on a pro rata basis (based upon the relative amounts of
such Commitments before giving effect to any reductions thereto pursuant to this
sentence) and (ii) to the extent the net cash proceeds from the issuance of the
New Senior Subordinated Notes will exceed $150 million, the amount of such
excess shall apply to reduce the Total U.S. Borrower Tranche A Term Loan
Commitment, the Total Tranche B Term Loan Commitment and the Total Tranche C
Term Loan Commitment on a pro rata basis (based upon the relative amounts of
such Commitments before giving effect to any reductions thereto pursuant to this
sentence).
(i) Each reduction to the Total U.S. Borrower Tranche A Term Loan
Commitment, the Total German Borrower Tranche A Term Loan Commitment, the Total
Delayed Draw Term Loan Commitment, the Total Tranche B Term Loan Commitment, the
Total Tranche C Term Loan Commitment and the Total Revolving Loan Commitment
pursuant to this Section 3.03 (or pursuant to Section 4.02) shall be applied
proportionately to reduce the U.S. Borrower Tranche A Term Loan Commitment, the
German Borrower Tranche A Term Loan Commitment, the Delayed Draw Term Loan
Commitment, the Tranche B Term Loan Commitment, the Tranche C Term Loan
Commitment or the Revolving Loan Commitment, as the case may be, of each Lender
with such a Commitment.
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<PAGE> 49
SECTION 4. Prepayments; Payments; Taxes.
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<PAGE> 50
4.01 Voluntary Prepayments. Each Borrower shall have the right to
prepay the Loans made to such Borrower, without premium or penalty, in whole or
in part at any time and from time to time on the following terms and conditions:
(i) such Borrower shall give the Administrative Agent prior to 2:00 P.M. (New
York time) at its Notice Office (x) in the case of Base Rate Loans, at least one
Business Day's prior written notice (or telephonic notice promptly confirmed in
writing) of its intent to prepay such Base Rate Loans (or same day notice in the
case of Swingline Loans, provided such notice is given prior to 12:00 Noon (New
York time)) and (y) in all other cases, at least three Business Days' prior
written notice (or telephonic notice promptly confirmed in writing) of its
intent to prepay Euro Rate Loans, whether U.S. Borrower Tranche A Term Loans,
German Borrower Tranche A Term Loans, Delayed Draw Term Loans, Tranche B Term
Loans, Tranche C Term Loans, Dollar Revolving Loans or Deutsche Mark Revolving
Loans shall be prepaid, the amount of such prepayment and the Types of Loans to
be prepaid and, in the case of Euro Rate Loans, the specific Borrowing or
Borrowings pursuant to which made, which notice the Administrative Agent shall
promptly transmit to each of the Lenders with Loans of the respective Tranche;
(ii) each prepayment shall be in an aggregate principal amount of at least (x)
in the case of Base Rate Loans, $1,000,000 (or $100,000 in the case of Swingline
Loans) and (y) in the case of Euro Rate Loans, at least $2,000,000 (or the
Deutsche Mark Equivalent thereof in the case of Deutsche Mark Loans), provided
that if any partial prepayment of Euro Rate Loans made pursuant to any Borrowing
shall reduce the outstanding Euro Rate Loans made pursuant to such Borrowing to
an amount less than the respective Minimum Borrowing Amount for such Tranche and
Type of Loans, then such Borrowing (x) in the case of Dollar Loans, shall be
converted at the end of the then current Interest Period into a Borrowing of
Base Rate Loans and (y) in the case of Deutsche Mark Loans, shall be repaid in
full at the end of the then current Interest Period; (iii) each prepayment in
respect of any Loans made pursuant to a Borrowing shall be applied pro rata
among such Loans; (iv) subject to the immediately succeeding sentence, each
voluntary prepayment of Term Loans pursuant to this Section 4.01(a) shall be
applied pro rata to each Tranche of Term Loans (based upon the then outstanding
principal amount of U.S. Borrower Tranche A Term Loans, German Borrower Tranche
A Term Loans (taking the Dollar Equivalent thereof), Delayed Draw Term Loans,
Tranche B Term Loans and Tranche C Term Loans); and (v) subject to the
immediately succeeding sentence, each voluntary prepayment of any Tranche of
Term Loans (after giving effect to any applicable requirements set forth above)
shall apply to reduce the then remaining Scheduled Repayments of such Tranche of
Term Loans on a pro rata basis (based upon the then remaining principal amounts
of such Scheduled Repayments of the respective Tranche of Term Loans, after
giving effect to all prior reductions thereto). Notwithstanding clauses (iv) and
(v) of the immediately preceding sentence, the U.S. Borrower may direct that any
voluntary prepayment of Term Loans be applied (x) first, to Scheduled Repayments
of Term Loans which shall be due and payable within 12 months from the date of
the respective voluntary pre-payment, in direct order of maturity (which may
result in a disproportionate allocation to the various Tranches of Term Loans)
and (y) to the extent in excess of the amounts to be applied pursuant to the
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<PAGE> 51
preceding clause (x), as provided in the immediately preceding sentence (without
giving regard to this sentence). The provisions of this Section 4.01 are further
subject to the provisions of Section 4.05.
4.02 Mandatory Repayments and Commitment Reductions. (a) (i) On
any day on which the sum of the aggregate outstanding principal amount of the
Swingline Loans, Revolving Loans (for this purpose, using the Dollar Equivalent
thereof in the case of outstanding Deutsche Mark Revolving Loans) and the Letter
of Credit Outstandings exceeds the Total Revolving Loan Commitment as then in
effect, the U.S. Borrower shall prepay on such day the principal of outstanding
Swingline Loans and, after the Swingline Loans have been repaid in full, the
U.S. Borrower shall repay the principal of outstanding Dollar Revolving Loans
and/or the German Borrowers shall repay the principal of outstanding Deutsche
Mark Revolving Loans (allocated between Dollar Revolving Loans and Deutsche Mark
Revolving Loans as the Revolving Loan Borrowers may elect) in an amount equal to
such excess. If, after giving effect to the prepayment in full of all
outstanding Swingline Loans and Revolving Loans, the aggregate amount of the
Letter of Credit Outstandings exceeds the Total Revolving Loan Commitment as
then in effect, the respective Account Parties shall pay to the Administrative
Agent at the appropriate Payment Office on such day an amount of cash or Cash
Equivalents of such excess (up to a maximum amount equal to the Letter of Credit
Outstandings at such time), such cash or Cash Equivalents to be held as security
for all obligations of the respective Account Party hereunder in a cash
collateral account to be established by the Administrative Agent.
(ii) If on any date the sum of the aggregate outstanding
principal amount of Swingline Loans, Dollar Revolving Loans and the U.S. Letter
of Credit Out- standings exceeds the U.S. Borrowing Base as then in effect, the
U.S. Borrower shall prepay on such day principal of outstanding Swingline Loans
and, after the Swingline Loans have been repaid in full, Dollar Revolving Loans
in an amount equal to such excess. If, after giving effect to the prepayment in
full of all outstanding Swingline Loans and Dollar Revolving Loans, the
aggregate amount of the U.S. Letter of Credit Outstandings exceeds the U.S.
Borrowing Base as then in effect, the U.S. Borrower shall pay to the
Administrative Agent at the appropriate Payment Office on such day an amount of
cash or Cash Equivalents equal to the amount of such excess (up to a maximum
amount equal to the U.S. Letter of Credit Outstandings at such time), such cash
or Cash Equivalents to be held as security for all obligations of the U.S.
Borrower hereunder in a cash collateral account to be established by the
Administrative Agent.
(iii) If on any date the sum of the aggregate outstanding
principal amount of Deutsche Mark Revolving Loans and the German Letter of
Credit Outstand- ings (each expressed in Deutsche Marks for purposes of
following clause (x) and each expressed in Dollars, taking the Dollar Equivalent
of all Deutsche Mark Revolving Loans then outstanding, for purposes of following
clauses (y) and (z)) exceeds the least of (x) the German Borrowing Base as then
in effect, (y) $55,000,000 or (z) the Total German
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<PAGE> 52
Revolving Loan Sub-Commitment as then in effect, then the German Borrowers shall
prepay (and shall be jointly and severally obligated to prepay) on such day
principal of outstanding Deutsche Mark Revolving Loans in an amount equal to
such excess. If, after giving effect to the prepayment in full of all
outstanding Deutsche Mark Revolving Loans, the aggregate amount of the German
Letter of Credit Outstandings (expressed in Deutsche Marks (and taking the
Deutsche Mark Equivalent of the Stated Amount of any German Letter of Credit
denominated in a currency other than Deutsche Marks) for purposes of following
clause (x) only) exceeds the least of (x) the German Borrowing Base as then in
effect, (y) $55,000,000 or (z) the Total German Revolving Loan Sub-Commitment as
then in effect, then the German Borrowers shall pay (and shall be jointly and
severally obligated to pay) to the Administrative Agent at the appropriate
Payment Office on such day an amount of cash or Cash Equivalents equal to the
amount of such excess (up to a maximum amount equal to the German Letter of
Credit Outstandings at such time), such cash or Cash Equivalents to be held as
security for all obligations of the German Borrowers hereunder in a cash
collateral account to be established by the Administrative Agent.
(b)(i) In addition to any other mandatory repayments or
commitment reductions pursuant to this Section 4.02, on each date set forth
below, the U.S. Borrower shall be required to repay that principal amount of
U.S. Borrower Tranche A Term Loans, to the extent then outstanding, as is set
forth opposite such date (each such repayment, as the same may be reduced as
provided in Sections 4.01 and 4.02(h) through (j), inclusive, a "U.S. Borrower
Tranche A Scheduled Repayment," and each such date, a "U.S. Borrower Tranche A
Scheduled Repayment Date"):
<TABLE>
<CAPTION>
U.S. Borrower Tranche A
Scheduled Repayment Date Amount
------------------------ ------
<S> <C>
Tranche A Term Loan Maturity Date $0
</TABLE>
(ii) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date set forth below, the
German Borrowers shall be required, and shall be jointly and severally
obligated, to repay that principal amount of German Borrower Tranche A Term
Loans, to the extent then outstanding, as is set forth opposite such date (each
such repayment, as the same may be reduced as provided in Sections 4.01 and
4.02(h) through (j), inclusive, a "German Borrower Tranche A Scheduled
Repayment," and each such date, a "German Borrower Tranche A Scheduled Repayment
Date"):
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<PAGE> 53
German Borrower Tranche A
Scheduled Repayment Date Amount
------------------------ -------
Tranche A Term Loan Maturity Date DM 0
(iii) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date set forth below, the U.S.
Borrower shall be required to repay that principal amount of Delayed Draw Term
Loans, to the extent then outstanding, as is set forth opposite such date (each
such repayment, as the same may be reduced as provided in Sections 4.01 and
4.02(h) through (j), inclusive, a "Delayed Draw Scheduled Repayment," and each
such date, a "Delayed Draw Scheduled Repayment Date"):
<TABLE>
<CAPTION>
Delayed Draw
Scheduled Repayment Date Amount
------------------------ ------
<S> <C>
October 31, 1998 $ 62,500
January 31, 1999 $ 62,500
April 30, 1999 $ 62,500
July 31, 1999 $ 62,500
October 31, 1999 $ 62,500
January 31, 2000 $ 62,500
April 30, 2000 $ 62,500
July 31, 2000 $ 62,500
October 31, 2000 $ 62,500
January 31, 2001 $ 62,500
April 30, 2001 $ 62,500
July 31, 2001 $ 62,500
October 31, 2001 $ 125,000
January 31, 2002 $ 125,000
April 30, 2002 $ 125,000
July 31, 2002 $ 125,000
October 31, 2002 $1,250,000
January 31, 2003 $1,250,000
April 30, 2003 $1,250,000
July 31, 2003 $1,250,000
October 31, 2003 $3,125,000
January 31, 2004 $3,125,000
April 30, 2004 $3,125,000
July 31, 2004 $3,125,000
October 31, 2004 $3,125,000
Delayed Draw Term Loan Maturity Date $3,125,000
</TABLE>
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<PAGE> 54
If at the time of the termination of the Total Delayed Draw Term
Loan Commitment (and after giving effect to the incurrence of any Delayed Draw
Term Loans at such time) the U.S. Borrower has not theretofore incurred at least
$25,000,000 of Delayed Draw Term Loans, then each of the Delayed Draw Scheduled
Repayments set forth in the table above shall be reduced on a pro rata basis
(based on the relative proportion that the amount of each such Delayed Draw
Scheduled Repayment bears to the aggregate amount of all such Delayed Draw
Scheduled Repayments as set forth in the table above.
(iv) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date set forth below, the U.S.
Borrower shall be required to repay that principal amount of Tranche B Term
Loans, to the extent then outstanding, as is set forth opposite such date (each
such repayment, as the same may be reduced as provided in Sections 4.01 and
4.02(h) through (j), inclusive, a "Tranche B Scheduled Repayment," and each such
date, a "Tranche B Scheduled Repayment Date"):
<TABLE>
<CAPTION>
Tranche B
Scheduled Repayment Date Amount
------------------------ ------
<S> <C>
October 31, 1997 $ 187,500
January 31, 1998 $ 187,500
April 30, 1998 $ 187,500
July 31, 1998 $ 187,500
October 31, 1998 $ 187,500
January 31, 1999 $ 187,500
April 30, 1999 $ 187,500
July 31, 1999 $ 187,500
October 31, 1999 $ 187,500
January 31, 2000 $ 187,500
April 30, 2000 $ 187,500
July 31, 2000 $ 187,500
October 31, 2000 $ 187,500
January 31, 2001 $ 187,500
April 30, 2001 $ 187,500
July 31, 2001 $ 187,500
October 31, 2001 $ 187,500
January 31, 2002 $ 187,500
April 30, 2002 $ 187,500
July 31, 2002 $ 187,500
October 31, 2002 $ 3,187,500
January 31, 2003 $ 3,187,500
April 30, 2003 $ 3,187,500
</TABLE>
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<PAGE> 55
<TABLE>
<S> <C>
July 31, 2003 $ 3,187,500
October 31, 2003 $ 9,375,000
January 31, 2004 $ 9,375,000
April 30, 2004 $ 9,375,000
July 31, 2004 $ 9,375,000
October 31, 2004 $10,500,000
Tranche B Term Loan Maturity Date $10,500,000
</TABLE>
(v) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date set forth below, the U.S.
Borrower shall be required to repay that principal amount of Tranche C Term
Loans, to the extent then outstanding, as is set forth opposite such date (each
such repayment, as the same may be reduced as provided in Sections 4.01 and
4.02(h) through (j), inclusive, a "Tranche C Scheduled Repayment," and each such
date, a "Tranche C Scheduled Repayment Date"):
<TABLE>
<CAPTION>
Tranche C
Scheduled Repayment Date Amount
------------------------ ------
<S> <C>
October 31, 1997 $ 100,000
January 31, 1998 $ 100,000
April 30, 1998 $ 100,000
July 31, 1998 $ 100,000
October 31, 1998 $ 100,000
January 31, 1999 $ 100,000
April 30, 1999 $ 100,000
July 31, 1999 $ 100,000
October 31, 1999 $ 100,000
January 31, 2000 $ 100,000
April 30, 2000 $ 100,000
July 31, 2000 $ 100,000
October 31, 2000 $ 100,000
January 31, 2001 $ 100,000
April 30, 2001 $ 100,000
July 31, 2001 $ 100,000
October 31, 2001 $ 100,000
January 31, 2002 $ 100,000
April 30, 2002 $ 100,000
July 31, 2002 $ 100,000
October 31, 2002 $ 100,000
January 31, 2003 $ 100,000
April 30, 2003 $ 100,000
July 31, 2003 $ 100,000
October 31, 2003 $ 4,700,000
</TABLE>
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<PAGE> 56
<TABLE>
<S> <C>
January 31, 2004 $ 4,700,000
April 30, 2004 $ 4,700,000
July 31, 2004 $ 4,700,000
October 31, 2004 $ 4,700,000
January 31, 2005 $ 4,700,000
April 30, 2005 $ 4,700,000
Tranche C Term Loan Maturity Date $ 4,700,000
</TABLE>
(c) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date after the Effective Date
upon which the U.S. Borrower or any of its Subsidiaries receives any cash
proceeds from any capital contribution or any sale or issuance of its equity
(other than equity contributions to any Subsidiary of the U.S. Borrower made by
the U.S. Borrower or any other Subsidiary of the U.S. Borrower), an amount equal
to 50% of the cash proceeds of such capital contribution or sale or issuance
(net of underwriting or placement discounts and commissions and other costs and
expenses associated therewith) shall, subject to Section 4.02(k), be applied in
accordance with the requirements of Sections 4.02(h) and (i). Notwithstanding
anything to the contrary contained above, an amount equal to the Net Cash
Proceeds received by the U.S. Borrower or any of its Subsidiaries from any sale
or disposition as described in Section 9.02(ix) shall be applied in accordance
with the requirements of this clause (c).
(d) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date after the Effective Date
upon which the U.S. Borrower or any of its Subsidiaries receives any cash
proceeds from any incurrence by the U.S. Borrower or any of its Subsidiaries of
Indebtedness for borrowed money (other than Indebtedness for borrowed money
permitted to be incurred pursuant to Section 9.04 as such Section is in effect
on the Effective Date), an amount equal to 100% of the cash proceeds of the
respective incurrence of Indebtedness (net of underwriting or placement
discounts and commissions and other costs associated therewith) shall, subject
to Sections 4.02(j) and (k), be applied in accordance with the requirements of
Sections 4.02(h) and (i).
(e) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date after the Effective Date
upon which the U.S. Borrower or any of its Subsidiaries receives cash proceeds
from any sale of assets (including capital stock and securities held thereby,
but excluding sales of assets permitted by clauses (v), (vi), (viii), (ix)
(although all proceeds received as a result of any disposition pursuant to said
clause (ix) shall be applied in accordance with the requirements of preceding
Section 4.02(c), regardless of whether the transaction is structured as the sale
of equity interests by the owners thereof or an issuance by the German Parent or
other entity described in said clause (ix)) and (x) of Section 9.02, an amount
equal to 100% of the Net Sale Proceeds therefrom shall, subject to Sections
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<PAGE> 57
4.02(j) and (k), be applied in accordance with the requirements of Sections
4.02(h) and (i); provided, however, that so long as no Default or Event of
Default then exists, the Net Sale Proceeds from any sale or disposition pursuant
to Section 9.02(vii) shall not be required to be so applied on such date to the
extent that such proceeds shall be used (and the U.S. Borrower notifies the
Administrative Agent in writing on the date the respective repayment would
otherwise be required that such proceeds are intended by it to be used,
specifying the amount of such proceeds) to purchase replacement or other assets
(excluding current assets) used or to be used in the business of U.S. Borrower
and its Subsidiaries as permitted by Section 9.15 within twelve months following
the date the respective such sale of assets, and, provided further, that (x) in
no event shall elections pursuant to the immediately preceding proviso apply to
more than $5,000,000 of Net Sale Proceeds in any fiscal year of the U.S.
Borrower and (y) if all or any portion of any such Net Sale Proceeds not
required to be so applied as a mandatory repayment as provided above are not so
reinvested within such twelve month period, such remaining portions shall be
applied on the last day of such twelve month period as a mandatory repayment in
accordance with the requirements of this Section 4.02(e).
(f) In addition to any other mandatory repayments pursuant to
this Section 4.02, on each Excess Cash Payment Date, an amount equal to 50% of
the Excess Cash Flow for the relevant Excess Cash Payment Period shall be
applied in accordance with the requirements of Sections 4.02(h) and (i).
(g) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, within 30 days following each date
after the Effective Date on which the U.S. Borrower or any of its Subsidiaries
receives any proceeds from any Recovery Event, an amount equal to 100% of the
proceeds of such Recovery Event (net of costs and taxes incurred in connection
with such Recovery Event) shall, subject to Section 4.02(j), be applied in
accordance with the requirements of Sections 4.02(h) and (i), provided that (x)
so long as no Default or Event of Default then exists pursuant to Section 10.05,
and if any other Default or Event of Default then exists so long as the Required
Lenders do not otherwise direct the Administrative Agent at any time, and so
long as such proceeds do not exceed $2,000,000, such proceeds shall not be
required to be so applied (and to the extent held or received by the
Administrative Agent or the Collateral Agent, shall be released to the U.S.
Borrower) on such date to the extent that the U.S. Borrower has delivered a
certificate to the Administrative Agent on or prior to such date stating that
such proceeds shall be used to replace or restore any properties or assets in
respect of which such proceeds were paid within 365 days (or 540 days, so long
as contractually committed to be so used within 365 days) following the date of
such Recovery Event (which certificate shall set forth the estimates of the
proceeds to be so expended) and (y) so long as no Default or Event of Default
then exists pursuant to Section 10.05, and if any other Default or Event of
Default then exists so long as the Required Lenders do not otherwise direct the
Administrative Agent at any time, and so long as to the extent that (a) the
amount of such proceeds exceeds $2,000,000, (b) the U.S. Borrower has delivered
to the Administrative Agent a certificate on or prior to the
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<PAGE> 58
date the application would otherwise be required pursuant to this Section
4.02(g) in the form described in clause (x) above and also certifying the
sufficiency of business interruption insurance as required by succeeding clause
(c), and (c) the U.S. Borrower has delivered to the Administrative Agent such
evidence as the Administrative Agent may reasonably request in form and
substance reasonably satisfactory to the Administrative Agent establishing that
the U.S. Borrower and/or its relevant Subsidiaries have sufficient business
interruption insurance and that the U.S. Borrower and/or its relevant
Subsidiaries will be receiving regular payments thereunder in such amounts and
at such times as are necessary, in conjunction with any cash and Cash
Equivalents then held by the U.S. Borrower and its Subsidiaries or otherwise
available to them and cash flow reasonably expected to be generated in the
ordinary course of business (in each case which funds will be accessible and
permitted to be used for such purposes) to satisfy all obligations and expenses
of the U.S. Borrower and its Subsidiaries (including, without limitation, all
debt service requirements, including pursuant to this Agreement), without any
delay or extension thereof, for the period from the date of the respective
casualty, condemnation or other event giving rise to the Recovery Event and
continuing through the completion of the replacement or restoration of
respective properties or assets, then the entire amount and not just the portion
in excess of $2,000,000 shall be deposited as security for the Obligations with
the Administrative Agent for the benefit of the Secured Creditors pursuant to a
cash collateral arrangement reasonably satisfactory to the Administrative Agent
whereby such proceeds shall be disbursed to the U.S. Borrower or its respective
Subsidiary from time to time as needed to pay actual costs incurred by it in
connection with the replacement or restoration of the respective properties or
assets (pursuant to such reasonable certification requirements as may be
established by the Administrative Agent), provided further, that at any time
while an Event of Default has occurred and is continuing, the Required Lenders
may direct the Administrative Agent (in which case the Administrative Agent
shall, and is hereby authorized by the Borrowers to, follow said directions) to
apply any or all proceeds then on deposit in such collateral account to the
repayment of Obligations hereunder in the same manner as proceeds would be
applied pursuant to the U.S. Security Agreement, and, provided further, that if
all or any portion of such proceeds not required to be applied as a mandatory
repayment and/or commitment reduction pursuant to the second preceding proviso
are either (A) not so used within 365 days after the date of receipt of proceeds
from the respective Recovery Event or (B) if contractually committed to be used
within 365 days after the date of receipt of proceeds from the respective
Recovery Event and not so used within 540 days after the date of receipt of
proceeds from the respective Recovery Event, then, in either case, such
remaining portion not used or contractually committed to be used in the case of
the preceding clause (A) and not used in the case of preceding clause (B), shall
be applied on the date which is 365 days following the date of receipt of
proceeds from the respective Recovery Event in the case of clause (A) above, or
the date which is 540 days after the date of receipt of proceeds from the
respective Recovery Event in the case of clause (B) above, in accordance with
the requirements of Section 4.02(h), (i) and (j).
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<PAGE> 59
(h) Each amount required to be applied to Term Loans pursuant to
this clause (h) as a result of the requirements of Sections 4.02(c), (d), (e),
(f) and (g), shall, subject to the relevant provisions of following clauses (j)
and (k) and Section 4.05, be applied (after any conversion by the respective
Borrower of any amounts received in a currency other than the relevant
Applicable Currency or Applicable Currencies, into the respective Applicable
Currency or Applicable Currencies) to repay the outstanding principal amount of
U.S. Borrower Tranche A Term Loans, German Borrower Tranche A Term Loans,
Delayed Draw Term Loans (to the extent then outstanding), Tranche B Term Loans
and Tranche C Term Loans (or, if the Initial Borrowing Date has not yet
occurred, to reduce the related Commitments) of the respective Tranches (with
each Tranche of Term Loans being allocated that percentage of the amount to be
so applied as is equal to a fraction (expressed as a percentage) the numerator
of which is equal to the outstanding principal amount of such Tranche of Term
Loans (or, if the Initial Borrowing Date has not yet occurred, the aggregate
Term Loan Commitments of the Lenders with respect to such Tranche) and the
denominator of which is equal to the then outstanding principal amount of all
Term Loans (or if the Initial Borrowing Date has not yet occurred, the Total
Term Loan Commitment at such time)). Any amount required to be applied to any
Tranche of Term Loans pursuant to the requirements of the immediately preceding
sentence, or pursuant to following clause (j), shall be applied to repay the
outstanding principal amount of Term Loans of the respective Tranche (or if the
Initial Borrowing Date has not yet occurred, to reduce the Total U.S. Borrower
Tranche A Term Loan Commitment, the Total German Borrower Tranche A Term Loan
Commitment, the Total Delayed Draw Term Loan Commitment, the Total Tranche B
Term Loan Commitment, or the Total Tranche C Term Loan Commitment, as the case
may be). The amount of each principal repayment of U.S. Borrower Tranche A Term
Loans, German Borrower Tranche A Term Loans, Delayed Draw Term Loans, Tranche B
Term Loans and Tranche C Term Loans (and the amount of each reduction to the
related Term Loan Commitments) made as required by this clause (h), or by
following clause (j), shall be applied pro rata to reduce the then remaining
Scheduled Repayments of the respective Tranche based upon the then remaining
amount of each Scheduled Repayment of the respective Tranche, after giving
effect to all prior reductions thereto.
(i) With respect to each repayment of Loans required by this
Section 4.02, the respective Borrower may designate the Types of Loans of the
respective Tranche which are to be repaid and, in the case of Euro Rate Loans,
the specific Borrowing or Borrowings of the respective Tranche pursuant to which
made, provided that: (i) in the case of repayments of Dollar Loans, repayments
of Eurodollar Loans of the respective Tranche pursuant to this Section 4.02 may
only be made on the last day of an Interest Period applicable thereto unless all
Eurodollar Loans of the respective Tranche with Interest Periods ending on such
date of required repayment and all Base Rate Loans of the respective Tranche
have been paid in full; (ii) if any repayment of Euro Rate Loans made pursuant
to a single Borrowing shall reduce the outstanding Loans made pursuant to such
Borrowing to an amount less than the respective Minimum Borrowing Amount for the
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<PAGE> 60
respective Tranche and Type of Loan, such Borrowing (x) in the case of Dollar
Loans, shall be converted at the end of the then current Interest Period into a
Borrowing of Base Rate Loans and (y) in the case of Deutsche Mark Loans, shall
be repaid in full at the end of the then current Interest Period (with the
amount of any such repayment to be applied pro rata to reduce the then remaining
Scheduled Repayments of the respective Tranche based upon the then remaining
amount of each Scheduled Repayment of the respective Tranche after giving effect
to all prior reductions thereto); and (iii) each repayment of any Loans made
pursuant to a Borrowing shall be applied pro rata among such Loans. In the
absence of a designation by the respective Borrower as described in the
preceding sentence, the Administrative Agent shall, subject to the above, make
such designation in its sole discretion.
(j) Notwithstanding anything to the contrary contained in this
Section 4.02, to the extent that any mandatory repayment after the Initial
Borrowing Date is required pursuant to any of Sections 4.02(d), (e) and (g), and
if the respective repayment is based on an event occurring with respect to
either of the German Borrowers or any of the German Subsidiaries, then, at the
time the respective repayment is otherwise required pursuant to this Section
4.02, the U.S. Borrower may designate that the amount of the respective such
repayment shall be applied (i) first, to the repayment of principal of German
Borrower Tranche A Term Loans then outstanding (to the extent of the amount
thereof), which amount shall be applied in accordance with the requirements of
the second and third sentences of Section 4.02(h) and the requirements of
Section 4.02(i), and (ii) second, to the extent the respective repayment exceeds
the aggregate principal amount of then outstanding German Borrower Tranche A
Term Loans, as otherwise required pursuant to preceding Sections 4.02(h) and (i)
(without regard to the provisions of this clause (j)).
(k) Notwithstanding anything to the contrary contained in this
Section 4.02, to the extent that mandatory repayments after the Initial
Borrowing Date would be required pursuant to one or more of Sections 4.02(c),
(d), (e) and/or (g), then (x) in each fiscal year of the U.S. Borrower, not more
than $1 million of cash proceeds otherwise required to be applied in accordance
with the requirements of said Sections may be excluded therefrom (in the
aggregate for all such Sections in any such fiscal year) and (y) to the extent
that proceeds (after giving effect to preceding clause (x)) at any time to be
applied pursuant to one or more of Sections 4.02(c), (d), (e) and/or (g)
aggregate less than $1,000,000, the required repayment may be deferred until the
first date upon which the amount of proceeds to be applied pursuant to said
Sections (taking into account any subsequent event of the type described in said
Sections and all pro- ceeds which would otherwise have been required to be
applied pursuant thereto but which have been deferred pursuant to this clause
(y)) equal or exceed $1,000,000.
(l) Notwithstanding anything to the contrary contained in this
Agreement or in any other Credit Document, all then outstanding Loans of any
Tranche
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<PAGE> 61
shall be repaid in full on the respective Maturity Date for such Tranche of
Loans or, if earlier, the date (if any) occurring after the Initial Borrowing
Date and on or prior to the Subsidiary Stock Restrictions Approval Date, upon
which any Lien is created with respect to, or any disposition occurs with
respect to, any capital stock of any Subsidiary of the U.S. Borrower identified
in the definition of "Subsidiary Stock Restrictions" contained herein if such
Lien or disposition, as the case may be, would not be permitted if the
Subsidiary Stock Restrictions contained in this Agreement were then effective in
accordance with the terms thereof had the Subsidiary Stock Restrictions Approval
Date theretofore occurred.
4.03 Method and Place of Payment. Except as otherwise
specifically provided herein, all payments under this Agreement or any Note
shall be made to the Administrative Agent for the account of the Lender or
Lenders entitled thereto not later than 2:00 P.M. (local time in the city in
which the Payment Office for the respective payments is located) on the date
when due and shall be made in (x) Dollars in immediately available funds at the
appropriate Payment Office of the Administrative Agent in respect of any
obligation of the Borrowers under this Agreement except as otherwise provided in
the immediately following clause (y) and (y) Deutsche Marks in immediately
available funds at the appropriate Payment Office of the Administrative Agent,
if such payment is made in respect of (i) principal of or interest on Deutsche
Mark Loans, or (ii) any increased costs, indemnities or other amounts owing with
respect to Deutsche Mark Loans (or Commitments relating thereto), in the case of
this clause (ii) to the extent the respective Lender which is charging same
denominates the amounts owing in Deutsche Marks. The Administrative Agent will
thereafter cause to be distributed on the same day (if payment was actually
received by the Administrative Agent prior to 2:00 P.M. local time in the city
in which such payments are to be made)) like funds relating to the payment of
principal, interest or Fees ratably to the Lenders entitled thereto. Any
payments under this Agreement which are made later than 2:00 P.M. (local time in
the city in which such payments are to be made) shall be deemed to have been
made on the next succeeding Business Day. Whenever any payment to be made
hereunder or under any Note shall be stated to be due on a day which is not a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day and, with respect to payments of principal, interest and fees shall
be payable at the applicable rate during such extension.
4.04 Net Payments. (a) All payments made by any Borrower
hereunder or under any Note will be made without setoff, counterclaim or other
defense. Except as provided in Sections 4.04(b) and (c), all such payments will
be made free and clear of, and without deduction or withholding for, any present
or future taxes, levies, imposts, duties, fees, assessments or other charges of
whatever nature now or hereafter imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein with respect to such payments
(but excluding, except as provided in the second succeeding sentence, any tax
imposed on or measured by the net income or profits or franchise taxes
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<PAGE> 62
based on net income of a Lender pursuant to the laws of the jurisdiction in
which it is organized or the jurisdiction in which the principal office or
applicable lending office of such Lender is located or any subdivision thereof
or therein) and all interest, penalties or similar liabilities with respect
thereto (all such non-excluded taxes, levies, imposts, duties, fees, assessments
or other charges being referred to collectively as "Taxes"). If any Taxes are so
levied or imposed, the respective Borrower agrees to pay the full amount of such
Taxes, and such additional amounts as may be necessary so that every payment of
all amounts due under this Agreement or under any Note, after withholding or
deduction for or on account of any Taxes, will not be less than the amount
provided for herein or in such Note. If any amounts are payable in respect of
Taxes pursuant to the preceding sentence, the respective Borrower agrees to
reimburse each Lender, upon the written request of such Lender, for the net
additional amount of taxes imposed on or measured by the net income or profits
of such Lender (after taking into account the amount of any credits realized by
such Lender) pursuant to the laws of the jurisdiction in which the principal
office or applicable lending office of such Lender is located or under the laws
of any political subdivision or taxing authority of any such jurisdiction in
which the principal office or applicable lending office of such Lender is
located and for any withholding of taxes as such Lender shall determine are
payable by, or withheld from, such Lender in respect of such amounts so paid to
or on behalf of such Lender pursuant to the preceding sentence and in respect of
any amounts paid to or on behalf of such Lender pursuant to this sentence. The
respective Borrower will furnish to the Administrative Agent within 45 days
after the date the payment of any Taxes is due pursuant to applicable law
certified copies of tax receipts evidencing such payment by the respective
Borrower. Each Borrower agrees to indemnify and hold harmless each Lender, and
reimburse such Lender upon its written request, for the amount of any Taxes so
levied or imposed and paid by such Lender.
(b) Each Lender that is not a United States person (as such term
is defined in Section 7701(a)(30) of the Code) agrees to deliver to the U.S.
Borrower and the Administrative Agent on or prior to the Effective Date, or in
the case of a Lender that is an assignee or transferee of an interest under this
Agreement pursuant to Section 1.13 or 13.04 (unless the respective Lender was
already a Lender hereunder immediately prior to such assignment or transfer), on
the date of such assignment or transfer to such Lender, (i) two accurate and
complete original signed copies of Internal Revenue Service Form 4224 or 1001
(or successor forms) certifying to such Lender's entitlement to a complete
exemption from United States withholding tax with respect to payments to be made
under this Agreement and under any Note, or (ii) if the Lender is not a "bank"
within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either
Internal Revenue Service Form 1001 or 4224 pursuant to clause (i) above, (x) a
certificate substantially in the form of Exhibit D (any such certificate, a
"Section 4.04(b)(ii) Certificate") and (y) two accurate and complete original
signed copies of Internal Revenue Service Form W-8 (or successor form)
certifying to such Lender's entitlement to a complete exemption from United
States withholding tax with respect to payments of interest to be made under
this Agreement and under any Note.
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<PAGE> 63
In addition, each Lender agrees that from time to time after the Effective Date,
when a lapse in time or change in circumstances renders the previous
certification obsolete or inaccurate in any material respect, it will deliver to
the U.S. Borrower and the Administrative Agent two new accurate and complete
original signed copies of Internal Revenue Service Form 4224 or 1001, or Form
W-8 and a Section 4.04(b)(ii) Certificate, as the case may be, and such other
forms as may be required in order to confirm or establish the entitlement of
such Lender to a continued exemption from or reduction in United States
withholding tax with respect to payments under this Agreement and any Note, or
it shall immediately notify the U.S. Borrower and the Administrative Agent of
its inability to deliver any such Form or Certificate in which case such Lender
shall not be required to deliver any such Form or Certificate pursuant to this
Section 4.04(b). Notwithstanding anything to the contrary contained in Section
4.04(a), but subject to Section 13.04(b) and the immediately succeeding
sentence, (x) the U.S. Borrower shall be entitled, to the extent it is required
to do so by law, to deduct or withhold income or similar taxes imposed by the
United States (or any political subdivision or taxing authority thereof or
therein) from interest, fees or other amounts payable hereunder for the account
of any Lender which is not a United States person (as such term is defined in
Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes to the
extent that such Lender has not provided to the U.S. Borrower U.S. Internal
Revenue Service Forms that establish a complete exemption from such deduction or
withholding and (y) the U.S. Borrower shall not be obligated pursuant to Section
4.04(a) hereof to gross-up payments to be made to a Lender in respect of income
or similar taxes imposed by the United States if (I) such Lender has not
provided to the U.S. Borrower the Internal Revenue Service Forms required to be
provided to the U.S. Borrower pursuant to this Section 4.04(b) or (II) in the
case of a payment, other than interest, to a Lender described in clause (ii)
above, to the extent that such forms do not establish a complete exemption from
withholding of such taxes. Notwithstanding anything to the contrary contained in
the preceding sentence or elsewhere in this Section 4.04 and except as set forth
in Section 13.04(b), the U.S. Borrower agrees to pay additional amounts and to
indemnify each Lender in the manner set forth in Section 4.04(a) (without regard
to the identity of the jurisdiction requiring the deduction or withholding) in
respect of any amounts deducted or withheld by it as described in the
immediately preceding sentence as a result of any changes after the Effective
Date in any applicable law, treaty, governmental rule, regulation, guideline or
order, or in the interpretation thereof, relating to the deducting or
withholding of income or similar Taxes.
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<PAGE> 64
(c) Each Lender that is not a resident of the Federal Republic of
Germany for Federal Republic of Germany tax purposes agrees to (i) deliver to
the German Borrowers and the Administrative Agent such declaration of
non-residence or other similar certificate as shall be requested by the German
Borrowers (giving the Lender sufficient time to satisfy such requirement), as is
required by statute, treaty or regulation of the Federal Republic of Germany
existing on the date hereof or which are not substantially more onerous than
those existing on the date hereof and which do not impose an unreasonable burden
(in time, resources or otherwise) on the Lender, or (ii) within 45 days after
the date hereof, make the requisite filing with the taxing authority of the
Federal Republic of Germany in order to certify that such Lender is subject to
income tax on a net basis in the United States (and/or the taxing authority of
the jurisdiction in which such Lender's principal office is located) as required
to establish its entitlement to an exemption from Federal Republic of Germany
withholding under the double tax treaty currently in force between the United
States (or the jurisdiction in which such Lender's principal office is located)
and the Federal Republic of Germany. Notwithstanding anything to the contrary
contained in Section 4.04(a), but subject to Section 13.04(b) and the
immediately succeeding sentence, (x) the German Borrowers shall be entitled, to
the extent required to do so by law, to deduct and withhold income or similar
taxes imposed by the Federal Republic of Germany on interest, Fees or other
amounts payable hereunder for the account of any Lender which is not a resident
of the Federal Republic of Germany for Federal Republic of Germany tax purposes
to the extent that (I) such Lender has not provided forms, declarations or other
certification required to establish a complete exemption from such deduction or
withholding or (II) the German Borrowers are required to do so by any thin
capitalization laws or regulations in the Federal Republic of Germany which
recharacterize the interest payments as dividends and (y) the German Borrowers
shall not be obligated pursuant to Section 4.04(a) hereof to gross-up payments
to be made to a Lender in respect of income or similar taxes imposed by the
Federal Republic of Germany if such Lender has not provided to the German
Borrowers the forms or declarations required to be provided by such Lender
pursuant to the preceding sentence. Notwithstanding anything to the contrary
contained in the preceding sentence or elsewhere in this Section 4.04, and
except as set forth in Section 13.04(b), the German Borrowers agree to pay any
additional amounts and to indemnify each Lender in the manner set forth in
Section 4.04(a) (without regard to the identity of the jurisdiction requiring
the deduction or withholding) in respect of any Taxes deducted or withheld by it
as described in the immediately preceding sentence as a result of any changes
after the Effective Date in any applicable law, treaty, governmental rule,
regulation, guideline or order, or in the interpretation thereof, relating to
the deducting or withholding of such Taxes. For the avoidance of doubt, nothing
herein shall require any Lender to disclose any information regarding its tax
affairs or computations to the German Borrowers or any of its Affiliates and no
Lender shall be obligated to disclose any of its tax returns to the German
Borrowers or any of its Affiliates or any agent of the foregoing.
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(d) If any Borrower pays any additional amount under this Section
4.04 to a Lender and such Lender determines in its sole discretion that it has
actually received or realized in connection therewith any refund or any
reduction of, or credit against, its Tax liabilities in or with respect to the
taxable year in which the additional amount is paid, such Lenders shall pay to
the Borrower an amount that the Lender shall, in its sole discretion, determine
is equal to the net benefit, after tax, which was obtained by the Lender in such
year as a consequence of such refund, reduction or credit.
4.05 Waivable Repayments. Notwithstanding anything to the
contrary contained in Sections 4.01 and 4.02 or elsewhere in this Agreement, at
the time any voluntary or mandatory repayment of outstanding Term Loans is to be
made pursuant to any of Sections 4.01 or 4.02 (c), (d), (e), (f) or (g) (each a
"Waivable Repayment"), (x) to the extent that U.S. Borrower Tranche A Term Loans
and/or German Borrower Tranche A Term Loans (taking the Dollar Equivalent
thereof) are then outstanding and will be outstanding after giving effect to the
application of that portion of the respective Waivable Repayment which is
required to be applied to such Loans pursuant to Section 4.01 or 4.02, as the
case may be, before giving effect to the application of this Section 4.05 (with
the aggregate principal amount which will be so outstanding being herein called
the "Outstanding A Term Loan Amount"), the U.S. Borrower shall have the option,
in its sole discretion, to give the Lenders with outstanding Delayed Draw Term
Loans, Tranche B Term Loans and Tranche C Term Loans (collectively, the "Longer
Maturity Term Loans") the option to waive their pro rata shares of the
respective Waivable Repayment upon the terms and provisions set forth in this
Section 4.05; provided that the aggregate amount to which the option to waive
pursuant to this clause (x) shall apply shall in no event exceed the Outstanding
A Term Loan Amount at such time and (y) at such time as no U.S. Borrower Tranche
A Term Loans or German Borrower Tranche A Term Loans remain outstanding, the
U.S. Borrower shall have the option, in its sole discretion, to give the Lenders
with outstanding Tranche C Term Loans the option to waive their pro rata share
of any Waivable Repayment, so long as the amount they are permitted to waive
pursuant to this clause (y) does not exceed the amount of Delayed Draw Term
Loans and Tranche B Term Loans which will be outstanding immediately before the
application of the amounts waived as contemplated by this Section 4.05. If the
U.S. Borrower elects to exercise the option referred to in the immediately
preceding sentence, the U.S. Borrower shall give the Administrative Agent
written notice of its intention to give the Lenders holding Longer Maturity Term
Loans or Tranche C Term Loans, as the case may be, the right to waive the
respective Waivable Repayment (including in such notice the aggregate amount of
such proposed or required repayment) at least five Business Days prior to the
date of the proposed prepayment, in the case of prepayments pursuant to Section
4.01, or on the date the respective repayment would otherwise be required to be
made, in the case of repayments required pursuant to Section 4.02 (c), (d), (e),
(f) or (g), which notice the Administrative Agent shall promptly forward to all
Lenders (including in such notice the amount of such repayment to be applied to
such Lenders' outstanding Longer Maturity Term Loans or Tranche C Term Loans, as
the case may be). The U.S. Borrower's offer
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to permit the Lenders holding Longer Maturity Term Loans or Tranche C Term
Loans, as the case may be, to waive any such Waivable Repayment may apply to all
or part of such repayment, provided that any offer to waive part of such
repayment must be made ratably to the Lenders holding Longer Maturity Term Loans
or Tranche C Term Loans, as the case may be, on the basis of their outstanding
such Loans. In the event that any such Lender desires to waive its pro rata
share of such Lender's right to receive any such Waivable Repayment in whole or
in part, such Lender shall so advise the Administrative Agent no later than 4:00
P.M. (New York time) on the date which is two Business Days after the date of
such notice from the Administrative Agent, which notice shall also include the
amounts that Lender desires to receive in respect of such repayment. If any
Lender does not reply to the Administrative Agent within two Business Days, such
Lender shall be deemed not to have waived any part of such repayment. If any
Lender does not specify an amount it wishes to receive, such Lender will be
deemed to have accepted 100% of its share of such repayment. In the event that
any such Lender waives all or part of its share of any such Waivable Repayment,
the Administrative Agent shall apply 100% of the amount so waived by such Lender
(x) first, to outstanding U.S. Borrower Tranche A Term Loans and German Borrower
Tranche A Term Loans, if any, in accordance with Section 4.01 or 4.02(h) and
(i), as the case may be, in each case as if no Longer Maturity Term Loans are
then outstanding and (ii) next, to the extent in excess thereof, to repay
outstanding principal of Delayed Draw Term Loans and Tranche B Term Loans in
accordance with the requirements in Section 4.01 or 4.02(h) and (i), as the case
may be, in each case determined as if no Tranche C Term Loans were then
outstanding. To the extent that the U.S. Borrower exercises its option pursuant
to this Section 4.05, any repayment otherwise required to be made to the Longer
Maturity Term Loans or Tranche C Term Loans, as the case may be, pursuant to
Section 4.02 (c), (d), (e), (f) or (g) shall be deferred until the date which is
three Business Days after the date upon which such repayment would otherwise
have been made. To the extent that any waivers are at any time granted pursuant
to this Section 4.05, then all repayments of outstanding Borrowings within any
Tranche of outstanding Term Loans shall be made in such manner as is necessary
so that the various Lenders of such Tranche continue to participate in the
outstanding Borrowings of the respective Tranche in such manner so that their
percentage of each outstanding Borrowing will be the same (it being understood
that the percentages of the various Lenders in the total outstandings may
change, but that they will not have differing percentages in the various
outstanding Borrowings).
SECTION 5A. Conditions Precedent to Initial Credit Events. The
obligation of each Lender to make Loans, and the obligation of any Issuing Bank
to issue Letters of Credit, on the Initial Borrowing Date, is subject to the
satisfaction of the following conditions:
5A.01 Execution of Agreement; Notes. On or prior to the Initial
Borrowing Date (i) the Effective Date shall have occurred and (ii) there shall
have been delivered to the Administrative Agent for the account of each of the
Lenders the appropriate U.S.
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Borrower Tranche A Term Note, German Borrower Tranche A Term Note, Delayed Draw
Term Note, Tranche B Term Note, Tranche C Term Note, Dollar Revolving Note
and/or Deutsche Mark Revolving Note executed by the appropriate Borrower or
Borrowers and to CSFB, the Swingline Note executed by the U.S. Borrower, in each
case in the amount, maturity and as otherwise provided herein.
5A.02 Opinions of Counsel. On the Initial Borrowing Date, the
Administrative Agent shall have received from (i) Milbank, Tweed, Hadley &
McCloy, special U.S. counsel to the Credit Parties, an opinion addressed to the
Administrative Agent, the Collateral Agent and each of the Lenders and dated the
Initial Borrowing Date in the form set forth as Exhibit E-1, (ii) Bruckhaus
Westrick Stegemann, special German counsel to the Credit Parties, an opinion
addressed to the Administrative Agent, the Collateral Agent and each of the
Lenders and dated the Initial Borrowing Date in the form set forth as Exhibit
E-2, (iii) Schreck Morris, special Nevada counsel to the Credit Parties, an
opinion addressed to the Administrative Agent, the Collateral Agent and each of
the Lenders and dated the Initial Borrowing Date in the form set forth as
Exhibit E-3, (iv) Watkins Ludlam & Stennis, P.A., special Mississippi counsel to
the Credit Parties, an opinion addressed to the Administrative Agent, the
Collateral Agent and each of the Lenders and dated the Initial Borrowing Date in
the form set forth as Exhibit E-4 and (v) Hoffman Sutterfield Ensenat, special
Louisiana counsel to the Credit Parties, an opinion addressed to the
Administrative Agent, the Collateral Agent and each of the Lenders and dated the
Initial Borrowing Date in the form set forth as Exhibit E-5, and in each case
covering such other matters incident to the transactions contemplated herein as
the Administrative Agent may reasonably request.
5A.03 Corporate Documents; Proceedings; etc. (a) On the Initial
Borrowing Date, the Administrative Agent shall have received a certificate of
each Credit Party, dated the Initial Borrowing Date, signed by an Authorized
Officer of such Credit Party, and attested to by the Secretary or any Assistant
Secretary of such Credit Party, in the form of Exhibit F with appropriate
insertions, together with copies of the certificate of incorporation (or
equivalent organizational document) and by-laws of such Credit Party and the
resolutions of such Credit Party referred to in such certificate, and the
foregoing shall be reasonably acceptable to the Administrative Agent.
(b) All corporate and legal proceedings and all instruments and
agreements in connection with the transactions contemplated by this Agreement
and the other Documents shall be reasonably satisfactory in form and substance
to the Administrative Agent and the Required Lenders, and the Administrative
Agent shall have received all information and copies of all documents and
papers, including records of corporate proceedings, governmental approvals and
good standing certificates if any, which the Administrative Agent reasonably may
have requested in connection therewith, such documents and papers where
appropriate to be certified by proper corporate or governmental authorities.
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5A.04 Fees, etc. On the Initial Borrowing Date, all costs, fees
and expenses, and all other costs contemplated by this Agreement, due to the
Administrative Agent and the Lenders (including, without limitation, reasonable
legal fees and expenses) shall have been paid to the extent then due.
5A.05 Issuance of New Senior Subordinated Notes. (a) On or prior
to the Initial Borrowing Date, the U.S. Borrower shall have received gross cash
proceeds of at least $125 million from the issuance of the New Senior
Subordinated Notes.
(b) On or prior to the Initial Borrowing Date, there shall have
been delivered to the Administrative Agent true and correct copies of all of the
New Senior Subordinated Note Documents (other than copies of the New Senior
Subordinated Notes actually issued) and all of the terms and conditions of the
New Senior Subordinated Note Documents shall (x) be consistent with the New
Senior Subordinated Notes Offering Memorandum and (y) be in form and substance
satisfactory to the Administrative Agent and the Required Lenders. The issuance
of the New Senior Subordinated Notes shall have occurred in all material
respects in accordance with the terms and conditions of the New Senior
Subordinated Note Documents and applicable law.
5A.06 Existing Senior Secured Notes Tender Offer/Consent
Solicitation; etc. On or prior to the Initial Borrowing Date and concurrently
with the Credit Events then occurring, the U.S. Borrower shall have consummated
a tender offer/consent solicitation with respect to the outstanding Existing
Senior Secured Notes (the "Existing Senior Secured Notes Tender Offer/Consent
Solicitation"), pursuant to which (1) the U.S. Borrower shall offer, subject to
the terms and conditions contained in the Existing Senior Secured Notes Tender
Offer/Consent Solicitation, to purchase all of the outstanding Existing Senior
Secured Notes at the cash price set forth in the Existing Senior Secured Notes
Tender Offer/Consent Solicitation and (2) consents shall be solicited to
proposed amendments to the Existing Senior Secured Notes Indenture and other
Existing Senior Secured Notes Collateral Documents, on terms and conditions
satisfactory to the Administrative Agent and the Required Lenders, which
amendment shall provide for the substantial elimination of the financial and
certain operating covenants contained in the Existing Senior Secured Notes
Indenture and the amendment of certain other provisions in the Existing Senior
Secured Notes Collateral Documents. In connection with the requirements of this
Section 5A.06, it is acknowledged and agreed that the terms outlined in the
Offer to Purchase and Consent Solicitation Statement dated July 3, 1997 are
acceptable to the Administrative Agent and the Lenders. All terms and conditions
of the Existing Senior Secured Notes Tender Offer/Consent Solicitation shall be
satisfactory to the Administrative Agent and the Required Lenders, and the
period for tendering Existing Senior Secured Notes pursuant thereto shall
terminate on or prior to the Initial Borrowing Date. On or prior to the Initial
Borrowing Date, (x) the U.S. Borrower shall have received sufficient consents to
authorize the execution and delivery of the Existing Senior
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Secured Notes Indenture Supplement (which shall include the Existing Senior
Secured Notes Collateral Documents Amendments), (y) the U.S. Borrower and the
trustee under the Existing Senior Secured Notes Indenture shall have duly
executed and delivered the Existing Senior Secured Notes Indenture Supplement
and (z) the trustee pursuant to the Existing Senior Secured Notes Indenture, as
well as any other agent, sub-agent, collateral agent or custodian which holds
any of the collateral for the Existing Senior Secured Notes, shall have entered
into a bailee agreement for the benefit of the Secured Creditors in
substantially the form attached hereto as Exhibit G (the "Bailee Agreement"). On
the Initial Borrowing Date and concurrently with the Credit Events then
occurring, the U.S. Borrower shall have repurchased all Existing Senior Secured
Notes tendered, and not theretofore withdrawn, pursuant to the Existing Senior
Secured Notes Tender Offer/Consent Solicitation (the "Existing Senior Secured
Notes Tender Offer Repurchases") and, after giving effect thereto, not more than
$30 million aggregate principal amount of Existing Senior Secured Notes shall
remain outstanding.
5A.07 Notice of Existing PIK Preferred Stock Redemption. On the
Initial Borrowing Date, the U.S. Borrower shall, or shall cause the transfer
agent to, deliver notices of redemption, in accordance with and meeting the
requirements of the Existing PIK Preferred Stock Documents, notifying the
holders thereof that the Existing PIK Preferred Stock shall be redeemed in full,
in accordance with the terms thereof, on a date to occur not later than 45 days
after the Initial Borrowing Date.
5A.08 Indebtedness to be Refinanced. (a) On or prior to the
Initial Borrowing Date or concurrently with the Credit Events then occurring,
the total commitments in respect of the Indebtedness to be Refinanced shall have
been terminated, and all loans and notes issued thereunder shall have been
repaid in full, together with interest thereon, all letters of credit issued
thereunder shall have been terminated or collateralized by new back-to-back
letters of credit in form and substance, and issued by an issuer, satisfactory
to the respective letter of credit issuers or otherwise supported in a manner
satisfactory to the respective letter of credit issuers, and all other amounts
owing pursuant to Indebtedness to be Refinanced shall have been repaid in full
and all documents in respect of the Indebtedness to be Refinanced and all
guarantees with respect thereto shall have been terminated and be of no further
force or effect except for continuing indemnification obligations described
therein.
(b) On or prior to the Initial Borrowing Date or concurrently
with the Credit Events then occurring, the creditors in respect to the
Indebtedness to be Refinanced shall have terminated and released all security
interests and Liens on the assets owned or to be owned by the U.S. Borrower or
any of its Subsidiaries granted in connection with the Indebtedness to be
Refinanced. The Administrative Agent shall have received such releases of
security interests in and Liens on the assets owned or to be owned by the U.S.
Borrower and its Subsidiaries as may have been reasonably requested by the
Administrative Agent, which releases shall be in form and substance reasonably
satisfac-
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tory to the Administrative Agent. Without limiting the foregoing, there shall
have been delivered (i) proper termination statements (Form UCC-3 or the
appropriate equivalent) for filing under the UCC of each jurisdiction where a
financing statement (Form UCC-1 or the appropriate equivalent) was filed with
respect to the U.S. Borrower or any of its Subsidiaries, or their respective
predecessors in interest, in connection with the security interests created with
respect to the Indebtedness to be Refinanced and the documentation related
thereto, (ii) terminations or assignments of any security interest in, or Lien
on, any patents, trademarks, copyrights, or similar interests of the U.S.
Borrower or any of its Subsidiaries, on which filings have been made, (iii)
terminations of all mortgages, leasehold mortgages and deeds of trust created
with respect to property of the U.S. Borrower or any of its Subsidiaries, or
their respective predecessors in interest, in each case, to secure the
obligations in respect of the Indebtedness to be Refinanced, all of which shall
be in form and substance reasonably satisfactory to the Administrative Agent and
(iv) all collateral owned by the U.S. Borrower or any of its Subsidiaries in the
possession of any of the creditors in respect of the Indebtedness to be
Refinanced or any collateral agent or trustee under any related security
document shall have been returned to the U.S. Borrower or such Subsidiary, as
the case may be.
5A.09 Outstanding Indebtedness and Preferred Stock. On the
Initial Borrowing Date, and after giving effect to the transactions described
above, the U.S. Borrower and its Subsidiaries shall have no outstanding
Indebtedness or Preferred Stock other than (i) Indebtedness pursuant to this
Agreement, (ii) the New Senior Subordinated Notes, (iii) the U.S. Borrower's
Series E Preferred Stock with an aggregate liquidation preference not to exceed
$13 million, (iv) not more than $30 million aggregate principal amount of
Existing Senior Secured Notes not accepted for purchase pursuant to the Existing
Senior Secured Notes Tender Offer/Consent Solicitation, (v) the U.S. Borrower's
Existing PIK Preferred Stock and (vi) such Existing Indebtedness, if any, as is
identified in Schedule V hereto.
5A.10 Adverse Change, etc. (a) On or prior to the Initial
Borrowing Date, nothing shall have occurred (and neither the Administrative
Agent nor the Lenders shall have become aware of any facts, conditions or other
information not previously known) which the Administrative Agent or the Required
Lenders shall determine could reasonably be expected to have a material adverse
effect on the rights or remedies of the Administrative Agent or the Lenders, or
on the ability of any Credit Party to perform its obligations to the
Administrative Agent and the Lenders or which could reasonably be expected to
have a Material Adverse Effect.
(b) Except as set forth on Schedule X hereto, all necessary
governmental (domestic and foreign) and third party approvals and/or consents in
connection with any Credit Event and the Transaction, the other transactions
contemplated by the Documents and otherwise referred to herein or therein shall
have been obtained and remain in effect, and all applicable waiting periods
shall have expired without any action
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being taken by any competent authority which restrains, prevents, or imposes
materially adverse conditions upon, the consummation of any Credit Event and the
Transaction or the other transactions contemplated by the Documents or otherwise
referred to herein or therein. Additionally, there shall not exist any judgment,
order, injunction or other restraint issued or filed or a hearing seeking
injunctive relief or other restraint pending or notified prohibiting or imposing
materially adverse conditions upon any Credit Event or the Transaction or the
other transactions contemplated by the Documents.
5A.11 Litigation. On the Initial Borrowing Date, no litigation by
any entity (private or governmental) shall be pending or threatened with respect
to this Agreement, any other Document or any documentation executed in
connection herewith or therewith or the transactions contemplated hereby or
thereby, or which the Administrative Agent or the Required Lenders shall
determine could reasonably be expected to have a material adverse effect on the
Transaction or a Material Adverse Effect.
5A.12 Subsidiary Guaranties. (a) On the Initial Borrowing Date,
each Domestic Subsidiary of the U.S. Borrower (other than (w) the Specified
Inactive Subsidiaries, (x) RCVP unless any Delayed Draw Term Loan is to be
incurred on the Initial Borrowing Date, (y) VSI, SVS and VDSI and (z) the
Specified Non-Material Subsidiaries as same exist on the Initial Borrowing Date;
provided that no Subsidiary shall be excluded pursuant to preceding clauses (w)
through (z), inclusive, if the respective Subsidiary executes and delivers any
guaranty in respect of the New Senior Subordinated Notes) shall have duly
authorized, executed and delivered a guaranty in the form of Exhibit H-1 (as
amended, modified or supplemented from time to time, the "U.S. Subsidiaries
Guaranty"), guaranteeing all of the obligations of each of the Borrowers as more
fully provided therein, and the U.S. Subsidiaries Guaranty shall be in full
force and effect.
(b) On the Initial Borrowing Date, each German Subsidiary (other
than the German Borrowers) shall have duly authorized, and executed and
delivered a guaranty in the form of Exhibit H-2 (as amended, modified or
supplemented from time to time, the "German Subsidiaries Guaranty"),
guaranteeing all of the obligations of the German Borrowers as more fully
provided therein, and the German Subsidiaries Guaranty shall be in full force
and effect.
5A.13 U.S. Pledge Agreement. On the Initial Borrowing Date, the
U.S. Borrower and each U.S. Subsidiary Guarantor shall have duly authorized,
executed and delivered a Pledge Agreement in the form of Exhibit I (as amended,
modified or supplemented from time to time, the "U.S. Pledge Agreement") and,
subject to the provisions of Section 4 of the U.S. Pledge Agreement, shall have
delivered to the Collateral Agent, as Pledgee thereunder, all of the Pledged
Securities, if any, referred to therein then owned by the U.S. Borrower and each
U.S. Subsidiary Guarantor, (x)
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endorsed in blank in the case of promissory notes constituting Pledged
Securities and (y) together with executed and undated stock powers in the case
of capital stock constituting Pledged Securities.
5A.14 U.S. Security Agreement. On the Initial Borrowing Date, the
U.S. Borrower and each U.S. Subsidiary Guarantor shall have duly authorized,
executed and delivered a Security Agreement in the form of Exhibit J (as
modified, supplemented or amended from time to time, the "U.S. Security
Agreement") covering all of the U.S. Borrower's and each such U.S. Subsidiary
Guarantor's present and future U.S. Security Agreement Collateral, together
with:
(i) proper Financing Statements (Form UCC-1 or the equivalent)
fully executed for filing under the UCC or other appropriate filing
offices of each jurisdiction as may be necessary or, in the reasonable
opinion of the Collateral Agent, desirable to perfect the security
interests purported to be created by the U.S. Security Agreement;
(ii) certified copies of Requests for Information or Copies (Form
UCC-11), or equivalent reports, dated as at a recent date listing all
effective financing statements that name the U.S. Borrower or any of the
U.S. Subsidiary Guarantors as debtor and that are filed in the
jurisdictions referred to in clause (i) above, together with copies of
such other financing statements that name the U.S. Borrower or any of
the U.S. Subsidiary Guarantors as debtor (none of which shall cover the
Collateral except to the extent evidencing Permitted Liens or in respect
of which the Collateral Agent shall have received termination statements
(Form UCC-3) or such other termination statements as shall be required
by local law fully executed for filing);
(iii) evidence of the execution and delivery of all other
instruments for recording and filing of, or with respect to, U.S.
Security Agreement as may be necessary or, in the reasonable opinion of
the Collateral Agent, desirable to perfect the security interests
intended to be created by the U.S. Security Agreement; and
(iv) evidence that all other actions necessary or, in the
reasonable opinion of the Collateral Agent, desirable to perfect and
protect the security interests purported to be created by the U.S.
Security Agreement have been taken.
5A.15 German Security Documents. (a) On the Initial Borrowing
Date, each of the German Subsidiaries (including the German Borrowers) shall
have duly authorized, executed and delivered a Security Agreement in
substantially the form of Exhibit K (the "German Security Agreement") together
with:
(i) evidence of the completion of all other recordings and
filings of, or
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with respect to, the German Security Agreement as may be necessary or,
in the reasonable opinion of the Collateral Agent, desirable to perfect
the security interests intended to be created by the German Security
Agreement including, without limitation, the delivery of the German
Security Agreement; and
(ii) evidence that all other actions necessary or, in the
reasonable opinion of the Collateral Agent, desirable to perfect and
protect the security interests purported to be created by the German
Security Agreement have been taken.
(b) On the Initial Borrowing Date, the Pledgors (as defined in
the German Pledge Agreement referred to below) shall have duly authorized,
executed and delivered a Pledge Agreement in the form of Exhibit L (the "German
Pledge Agreement").
5A.16 Mortgages; Title Insurance; Survey. On the Initial
Borrowing Date, the Collateral Agent shall have received:
(i) fully executed counterparts of mortgages, deeds of trust or
deeds to secure debt, in each case in form and substance reasonably
satisfactory to the Administrative Agent (as modified, supplemented or
amended from time to time, each a "Mortgage" and, collectively, the
"Mortgages"), which Mortgages shall cover such of the Real Property, if
any, owned or leased by the U.S. Borrower and its Domestic Subsidiaries
as shall be designated as a Mortgaged Property on Schedule III (each a
"Mortgaged Property" and, collectively, the "Mortgaged Properties"),
together with evidence that counterparts of the Mortgages have been
delivered to the title insurance company insuring the Lien of the
Mortgages for recording in all places to the extent necessary or, in the
reasonable opinion of the Collateral Agent, desirable to effectively
create a valid and enforceable first priority mortgage lien on each
Mortgaged Property in favor of the Collateral Agent (or such other
trustee as may be required or desired under local law) for the benefit
of the Secured Creditors, subject to such exceptions as are listed in
the respective Mortgage Policy;
(ii) a mortgagee title insurance policy on each Mortgaged
Property issued by a title insurer reasonably satisfactory to the
Collateral Agent (the "Mortgage Policies") in amounts reasonably
satisfactory to the Administrative Agent assuring the Collateral Agent
that the Mortgages on such Mortgaged Properties are valid and
enforceable first priority mortgage liens on the respective Mortgaged
Properties, free and clear of all defects and encumbrances except
Permitted Encumbrances and such Mortgage Policies shall otherwise be in
form and substance reasonably satisfactory to the Administrative Agent
and shall include, as appropriate, an endorsement for future advances
under this Agreement and the
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Notes and for any other matter that the Administrative Agent in its
reasonable discretion may reasonably request, shall not include an
exception for mechanics' liens, and shall provide for affirmative
insurance as the Administrative Agent in its discretion may reasonably
request; and
(iii) a survey, in form and substance reasonably satisfactory to
the Administrative Agent, of each Mortgaged Property, certified by a
licensed professional surveyor reasonably satisfactory to the
Administrative Agent.
5A.17 Pro Forma Balance Sheet. On or prior to the Initial
Borrowing Date, there shall have been delivered to the Administrative Agent an
unaudited pro forma consolidated balance sheet of the U.S. Borrower and its
Subsidiaries, after giving effect to the Transaction and the incurrence of all
Indebtedness contemplated herein and prepared in accordance with generally
accepted accounting principles, which pro forma consolidated balance sheets
shall not be materially different than the pro forma balance sheet delivered to
the Administrative Agent on July 8, 1997.
5A.18 Borrowing Base Certificates. On the Initial Borrowing Date,
each of the U.S. Borrower and the German Borrowers shall have delivered to the
Administrative Agent its or their initial Borrowing Base Certificate meeting the
requirements of Section 8.01(j).
5A.19 Solvency Certificate; Environmental Analyses; Insurance
Analyses. On the Initial Borrowing Date, there shall have been delivered to the
Administrative Agent:
(i) a solvency certificate in the form of Exhibit M from the
chief financial officer of the U.S. Borrower and dated the Initial
Borrowing Date;
(ii) environmental and hazardous substance assessment and
analyses in scope, and in form and substance, satisfactory to the
Administrative Agent and the results of which do not disclose any
environmental liabilities or potential environmental liabilities
reasonably likely to result in a Material Adverse Effect; and
(iii) analyses and evidence of insurance complying with the
requirements of Section 8.03 for the business and properties of the U.S.
Borrower and its Subsidiaries, in scope, form and substance reasonably
satisfactory to the Administrative Agent and the Required Lenders and
naming the Collateral Agent as an additional insured and as loss payee,
and stating that such insurance shall not be cancelled or revised
without at least 30 days prior written notice by the insurer to the
Collateral Agent.
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SECTION 5B. Conditions Precedent to Initial Delayed Draw Term
Loans. The obligation of each Lender with a Delayed Draw Term Loan Commitment to
make Delayed Draw Term Loans is subject to the satisfaction of the following
conditions:
5B.01 Occurrence of Initial Borrowing Date. On or prior to the
date of the making of the initial Delayed Draw Term Loans (the "Initial Delayed
Draw Term Loan Borrowing Date"), the Initial Borrowing Date shall have occurred.
5B.02 Purchase of Rainbow Royalty Payments; Rainbow Mortgage
Debt. On or prior to the Initial Delayed Draw Term Loan Borrowing Date, the U.S.
Borrower shall have (i) purchased 100% of the Rainbow Royalty Payments for an
amount not to exceed $19 million and (ii) purchased the Rainbow Debt in the
amount of approximately $7.4 million, for cash consideration not to exceed $7.4
million. All rights of the U.S. Borrower with respect to the Rainbow Royalty
Payments shall have been pledged as security for the Secured Lenders pursuant to
the U.S. Security Agreement, and the Rainbow Debt shall have been pledged (and
all promissory notes or chattel paper with respect thereto shall have been
delivered for pledge) pursuant to the U.S. Pledge Agreement.
5B.03 Execution of Guaranty and Security Documents by RCVP. On
the Initial Delayed Draw Term Loan Borrowing Date, RCVP shall have executed and
delivered a counterpart of the U.S. Subsidiaries Guaranty pursuant to which RCVP
unconditionally guaranties all Obligations of the Borrowers pursuant to this
Agreement; provided that it is expressly acknowledged and agreed that the
guaranty executed and delivered by RCVP pursuant to this Section 5B.03 may be
expressly limited as provided in the U.S. Subsidiaries Guaranty. Furthermore,
RCVP shall have executed and delivered counterparts to the U.S. Security
Agreement and the U.S. Pledge Agreement (or substantially similar security
documents or such other security documents as may be reasonably requested by the
Administrative Agent or Collateral Agent), providing security interests in its
assets to secure its obligations pursuant to the guaranty referenced in the
immediately preceding sentence. Furthermore, on the Initial Delayed Draw Term
Loan Borrowing Date, the Collateral Agent shall have received security interests
(whether pursuant to mortgages, deeds of trusts, security agreements or other
documentation) in such other assets of RCVP as shall have been requested by the
Administrative Agent, the Collateral Agent or the Required Lenders. In
connection with the actions to be taken pursuant to this Section 5B.03, the U.S.
Borrower and RCVP shall be required to take such actions, and execute such
ancillary documentation and furnish such opinions of counsel, as would have been
required (and as specified by the Administrative Agent or the Collateral Agent)
had the actions required by this Section 5B been taken on the Initial Borrowing
Date pursuant to Section 5A. All actions taken pursuant to this Section 5B.03
shall be taken to the satisfaction of the Administrative Agent and Collateral
Agent.
5B.04 Opinions of Counsel. Without limiting the foregoing, the
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Administrative Agent shall receive such opinions of counsel in connection with
the actions taken pursuant to this Section 5B as shall be reasonably requested
by the Administrative Agent, the Collateral Agent or the Required Lenders, which
opinions (and the counsel delivering same) shall be satisfactory in form and
substance to the Administrative Agent and the Collateral Agent.
SECTION 6. Conditions Precedent to All Credit Events. The
obligation of each Lender to make Loans (including Loans made on the Initial
Borrowing Date and the Initial Delayed Draw Term Loan Borrowing Date, but
excluding Mandatory Borrowings to be made thereafter, which shall be made as
provided in Section 1.01(h)), and the obligation of any Issuing Bank to issue
any Letter of Credit, is subject, at the time of each such Credit Event (except
as hereinafter indicated), to the satisfaction of the following conditions:
6.01 No Default; Representations and Warranties. At the time of
each such Credit Event and also after giving effect thereto (i) there shall
exist no Default or Event of Default and (ii) all representations and warranties
contained herein and in the other Credit Documents shall be true and correct in
all material respects with the same effect as though such representations and
warranties had been made on the date of such Credit Event (it being understood
and agreed that any representation or warranty which by its terms is made as of
a specified date shall be required to be true and correct in all material
respects only as of such specified date).
6.02 Notice of Borrowing; Letter of Credit Request. (a) Prior to
the making of each Loan (excluding Swingline Loans), the Administrative Agent
shall have received a Notice of Borrowing meeting the requirements of Section
1.03(a). Prior to the making of any Swingline Loan, CSFB shall have received the
notice required by Section 1.03(b)(i).
(b) Prior to the issuance of each Letter of Credit, the
Administrative Agent and the respective Issuing Bank shall have received a
Letter of Credit Request meeting the requirements of Section 2.03.
6.03 Regulations U and G. If at any time any Margin Stock is
pledged or required to be pledged pursuant to any of the Security Documents, all
actions required to be taken pursuant to Section 8.15 shall have been taken to
the reasonable satisfaction of the Administrative Agent.
The acceptance of the proceeds of each Loan or the making of each
Letter of Credit Request (occurring on the Initial Borrowing Date and
thereafter) shall constitute a representation and warranty by each Credit Party
to the Administrative Agent and each of the Lenders that all the conditions
specified in Section 5A (with respect to Credit Events on the Initial Borrowing
Date), in Section 5B (with respect to Credit Events on the Initial
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Delayed Draw Term Loan Borrowing Date) and in this Section 6 (with respect to
Credit Events on and after the Initial Borrowing Date) and applicable to such
Credit Event exist as of that time. All of the Notes, certificates, legal
opinions and other documents and papers referred to in Section 5A, 5B and in
this Section 6, unless otherwise specified, shall be delivered to the
Administrative Agent at the Notice Office for the account of each of the Lenders
and, except for the Notes, in sufficient counterparts or copies for each of the
Lenders and shall be in form and substance reasonably satisfactory to the
Administrative Agent and the Required Lenders.
SECTION 7. Representations, Warranties and Agreements. In order
to induce the Lenders to enter into this Agreement and to make the Loans, and
issue (or participate in) the Letters of Credit as provided herein, each
Borrower (as to itself and its Subsidiaries) makes the following
representations, warranties and agreements, in each case after giving effect to
the actions taken pursuant to Section 5A on the Initial Borrowing Date, all of
which shall survive the execution and delivery of this Agreement and the Notes
and the making of the Loans and issuance of the Letters of Credit, with the
occurrence of each Credit Event on or after the Initial Borrowing Date being
deemed to constitute a representation and warranty that the matters specified in
this Section 7 are true and correct in all material respects on and as of the
Initial Borrowing Date and in all material respects on the date of each such
Credit Event (it being understood and agreed that any representation or warranty
which by its terms is made as of a specified date shall be required to be true
and correct in all material respects only as of such specified date).
7.01 Corporate and Other Status. Each Borrower and each of its
Subsidiaries, other than Specified Inactive Subsidiaries, (i) is a duly
organized and validly existing corporation, partnership or other entity in good
standing under the laws of the jurisdiction of its incorporation, (ii) has the
requisite corporate or other power and authority to own its property and assets
and to transact the business in which it is engaged and presently proposes to
engage and (iii) is duly qualified and is authorized to do business and is in
good standing in each jurisdiction where the ownership, leasing or operation of
its property or the conduct of its business requires such qualification except
for failures to be so qualified which, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
7.02 Corporate and Other Power and Authority. Each Credit Party
has the requisite corporate or other power and authority to execute, deliver and
perform the terms and provisions of each of the Documents to which it is party
and has taken all necessary corporate or other action to authorize the
execution, delivery and performance by it of each of such Documents. Each Credit
Party has duly executed and delivered each of the Documents to which it is (as
determined on each date upon which this representation is made) party, and each
of such Documents constitutes its legal, valid and binding obligation
enforceable in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization,
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moratorium or other similar laws generally affecting creditors' rights and by
equitable principles (regardless of whether enforcement is sought in equity or
at law).
7.03 No Violation. Neither the execution, delivery or performance
by any Credit Party of the Documents to which it is a party, nor compliance by
it with the terms and provisions thereof, (i) will contravene any provision of
any law, statute, rule or regulation or any order, writ, injunction or decree of
any court or governmental instrumentality, (ii) will conflict with or result in
any breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or the
obligation to create or impose) any Lien (except pursuant to the Security
Documents) upon any of the property or assets of any Credit Party or any of its
Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust,
credit agreement or loan agreement, or any other material agreement, contract or
instrument, to which any Borrower or any of its Subsidiaries is a party or by
which it or any of its property or assets is bound or to which it may be subject
or (iii) will violate any provision of the certificate of incorporation or
by-laws (or equivalent organizational documents) of any Borrower or any of its
Subsidiaries.
7.04 Governmental Approvals. Except as specifically described in
Schedule X, no order, consent, approval, license, authorization or validation
of, or filing, recording or registration with (except as have been obtained or
made on or prior to the Initial Borrowing Date), or exemption by, any
governmental or public body or authority, or any subdivision thereof, is
required to authorize, or is required in connection with, (i) the execution,
delivery and performance of any Document or (ii) the legality, validity, binding
effect or enforceability of any such Document.
7.05 Financial Statements; Financial Condition; Undisclosed
Liabilities; Projections; etc. (a) The consolidated balance sheet of the U.S.
Borrower and its Subsidiaries at June 30, 1995, June 30, 1996 and March 31, 1997
and the related statements of consolidated income, consolidated cash flows and
shareholders' equity of the U.S. Borrower and its Subsidiaries for the fiscal
year or the nine-month period ended on such date, as the case may be, and
furnished to the Lenders prior to the Initial Borrowing Date, fairly present in
all material respects the consolidated results of the operations of the U.S.
Borrower and its Subsidiaries for the respective fiscal year or nine-month
period ended on such date, as the case may be, and consolidated financial
position of the U.S. Borrower and its Subsidiaries at the date of such balance
sheet. All such consolidated financial statements have been prepared in
accordance with generally accepted accounting principles consistently applied,
subject to normal year-end audit adjustments and the absence of footnotes in the
case of the March 31, 1997 financial statements.
(b) The consolidated balance sheet of Alliance Automaten & Co. KG
and its Subsidiaries (excluding Bally Gaming International GmbH) at March
31,1997 and the related statements of consolidated income for the nine months
ended on such date and
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furnished to the Lenders prior to the Initial Borrowing Date, were prepared in
accordance with GAAP as of March 31, 1997 and give a true and fair view of the
state of affairs of Alliance Automaten & Co. KG and its Subsidiaries (excluding
Bally Gaming International GmbH) at March 31, 1997 and for the nine months then
ended.
(c) Since March 31, 1996 (but for this purpose, assuming that the
Transaction had been consummated on such date), there has been no material
adverse change in the business, operations, property, assets, liabilities,
condition (financial or otherwise) or prospects of the U.S. Borrower and its
Subsidiaries taken as a whole.
(d) (i) On and as of the Initial Borrowing Date, after giving
effect to the Transaction and to all Indebtedness (including the Loans) being
incurred or assumed and Liens created by the Credit Parties in connection
therewith, (a) the sum of the assets, at a fair valuation, of the U.S. Borrower
and its Subsidiaries taken as a whole and each of the U.S. Borrower, Bally Wulff
Automaten and Bally Wulff Vertriebs on a stand-alone basis will exceed their
respective debts; (b) the U.S. Borrower and its Subsidiaries taken as a whole
and each of the U.S. Borrower, Bally Wulff Automaten and Bally Wulff Vertriebs
on a stand-alone basis have not incurred and do not intend to incur, and do not
believe that they will incur, debts beyond their ability to pay such debts as
such debts mature; and (c) the U.S. Borrower and its Subsidiaries taken as a
whole and each of the U.S. Borrower, Bally Wulff Automaten and Bally Wulff
Vertriebs on a stand-alone basis will have sufficient capital with which to
conduct their respective businesses. For purposes of this Section 7.05(d),
"debt" means any liability on a claim, and "claim" means (i) right to payment,
whether or not such a right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured, or unsecured or (ii) right to an equitable remedy for breach of
performance if such breach gives rise to a payment, whether or not such right to
an equitable remedy is reduced to judgment, fixed, contingent, matured,
unmatured, disputed, undisputed, secured or unsecured.
(e) Except (i) as disclosed in the financial statements delivered
pursuant to Sections 7.05(a) and (b) and except for the Transaction and (ii)
liabilities arising in the ordinary course of business since March 31, 1997,
there were as of the Initial Borrowing Date no liabilities or obligations with
respect to the U.S. Borrower or any of its Subsidiaries of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and whether or not due)
which, either individually or in aggregate, would be material to the U.S.
Borrower and its Subsidiaries taken as a whole. As of the Initial Borrowing
Date, and except for the Transaction, no Borrower knows of any basis for the
assertion against it or any of its Subsidiaries of any liability or obligation
of any nature whatsoever that is not disclosed in the financial statements
delivered pursuant to Sections 7.05(a) and (b) which, either individually or in
the aggregate, could reasonably be expected to be material to the U.S. Borrower
or the U.S. Borrower and its Subsidiaries taken as a whole.
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(f) On and as of the Initial Borrowing Date, the Projections have
been prepared in good faith and are based on reasonable assumptions under the
then known facts and circumstances (it being understood that nothing contained
herein shall constitute a representation that the results forecasted in such
Projections will in fact be achieved), and there are no statements or
conclusions in any of the Projections which are based upon or include
information known to any Borrower to be misleading in any material respect or
which knowingly fail to take into account material information regarding the
matters reported therein. On the Initial Borrowing Date, each Borrower believes
that the Projections are reasonable and attainable based upon the then known
facts and circumstances, it being understood that nothing contained herein shall
constitute a representation that the results forecasted in such Projections will
in fact be achieved.
7.06 Litigation. There are no actions, suits or proceedings
pending or, to the best knowledge of each Borrower, threatened (i) with respect
to any Document or (ii) that are reasonably likely to result in a Material
Adverse Effect.
7.07 True and Complete Disclosure. All factual information (other
than the Projections, which are covered in Section 7.05(f)) (taken as a whole)
furnished by any Credit Party in writing to the Administrative Agent or any
Lender (including, without limitation, all information contained in the
Documents), is, and all other such factual information (taken as a whole)
hereafter furnished by or on behalf of any Credit Party in writing to the
Administrative Agent or any Lender will be, true and accurate in all material
respects on the date as of which such information is dated or certified and not
incomplete by omitting to state any fact necessary to make such information
(taken as a whole) not misleading in any material respect at such time in light
of the circumstances under which such information was provided.
7.08 Use of Proceeds; Margin Regulations. (a) All proceeds of the
U.S. Borrower Tranche A Term Loans, the German Borrower Tranche A Term Loans,
the Tranche B Term Loans and the Tranche C Term Loans will be used by the
Borrowers (i) to finance the Refinancing (including, without limitation, to
refinance Revolving Loans theretofore incurred to finance purchases of Existing
PIK Preferred Stock before the PIK Preferred Drawdown Date pursuant to Section
9.03(iv)) and (ii) to pay fees and expenses related to the Transaction.
(b) All proceeds of the Delayed Draw Term Loans shall be used by
the U.S. Borrower to purchase the assets as contemplated in Section 5B.02.
(c) The proceeds of Revolving Loans incurred by each Revolving
Loan Borrower will be used for such Revolving Loan Borrower's and its
Subsidiaries' general corporate and working capital purposes, provided that no
proceeds of any Revolving Loan may be used to finance the Refinancing (although
up to $10 million of
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Revolving Loans may be utilized on the Initial Borrowing Date to fund working
capital requirements of the U.S. Borrower and its Subsidiaries (including
refinancing amounts owing under Indebtedness to be Refinanced) and proceeds of
Revolving Loans may be used after the Initial Borrowing Date to pay fees and
expenses incurred in connection with the Refinancing). In addition, Revolving
Loans may be incurred to finance acquisitions permitted under Section 9.02 and
otherwise in accordance with the terms of this Agreement.
(d) No part of the proceeds of any Loan (other than Revolving
Loans and Swingline Loans incurred after the Initial Borrowing Date) will be
used to purchase or carry any Margin Stock or to extend credit for the purpose
of purchasing or carrying any Margin Stock. Neither the making of any Loan nor
the use of the proceeds thereof nor the occurrence of any other Credit Event
will violate or be inconsistent with the provisions of Regulation G, T, U or X.
7.09 Tax Returns and Payments. The U.S. Borrower and each of its
Subsidiaries have timely filed or caused to be timely filed with the appropriate
taxing authority, all Federal, and all material state, local, foreign and other
returns, statements, forms and reports for taxes (the "Returns") required to be
filed by or with respect to the income, properties or operations of the U.S.
Borrower and/or any of its Subsidiaries. The Returns accurately reflect all
liability for taxes of the U.S. Borrower and its Subsidiaries for the periods
covered thereby. The U.S. Borrower and each of its Subsidiaries have paid all
taxes payable by them other than taxes contested in good faith and for which
adequate reserves have been established in accordance with generally accepted
accounting principles. On the Effective Date, there is no material action, suit,
proceeding, investigation, audit or claim now pending or, to the knowledge of
any Borrower, threatened by any authority regarding any taxes relating to the
U.S. Borrower or any of its Subsidiaries. As of the Initial Borrowing Date,
neither the U.S. Borrower nor any of its Subsidiaries has entered into an
agreement or waiver or been requested to enter into an agreement or waiver
extending any statute of limitations relating to the payment or collection of
taxes of the U.S. Borrower or any of its Subsidiaries, is aware of any agreement
or waiver extending any statute of limitations relating to the payment or
collection of other taxes of the U.S. Borrower or any of its Subsidiaries, or is
aware of any circumstances that would cause the taxable years or other taxable
periods of the U.S. Borrower or any of its Subsidiaries not to be subject to the
normally applicable statute of limitations.
7.10 Compliance with ERISA. (a) Schedule IX sets forth each Plan
in effect on the date hereof; each Plan (and each related trust, insurance
contract or fund) is in compliance with its terms and with all applicable laws,
including without limitation ERISA and the Code except to the extent that such a
failure to comply could not reasonably be expected to result in a Material
Adverse Effect; each Plan (and each related trust, if any) which is intended to
be qualified under Section 401(a) of the Code has received a
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determination letter from the Internal Revenue Service to the effect that it
meets the requirements of Sections 401(a) and 501(a) of the Code or a request
for such a determination letter is pending; no Reportable Event has occurred; to
the best knowledge of the U.S. Borrower no Plan which is a multiemployer plan
(as defined in Section 4001(a)(3) of ERISA) is insolvent or in reorganization if
such insolvency or reorganization could reasonably be expected to have a
Material Adverse Effect; no Plan has an Unfunded Current Liability which, when
added to the aggregate amount of Unfunded Current Liabilities with respect to
all other Plans, exceeds an amount that could reasonably be expected to result
in a Material Adverse Effect; no Plan which is subject to Section 412 of the
Code or Section 302 of ERISA has an accumulated funding deficiency, within the
meaning of such sections of the Code or ERISA, or has applied for or received a
waiver of an accumulated funding deficiency or an extension of any amortization
period, within the meaning of Section 412 of the Code or Section 303 or 304 of
ERISA in an amount that could reasonably be expected to result in a Material
Adverse Effect; all contributions required to be made with respect to a Plan
have been timely made except to the extent that the failure to make any such
contribution could not reasonably be expected to result in a Material Adverse
Effect; neither the U.S. Borrower nor any Subsidiary of the U.S. Borrower or any
ERISA Affiliate has incurred any liability (including any indirect, contingent
or secondary liability) to or on account of a Plan pursuant to Section 409,
502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or
Section 401(a)(29), 4971 or 4975 of the Code or expects to incur any such
liability under any of the foregoing sections with respect to any Plan which
could reasonably be expected to result in a Material Adverse Effect; to the best
knowledge of the U.S. Borrower or any Subsidiary of the U.S. Borrower or any
ERISA Affiliate, no condition exists which presents a material risk to the U.S.
Borrower or any Subsidiary of the U.S. Borrower or any ERISA Affiliate of
incurring a liability to or on account of a Plan pursuant to the foregoing
provisions of ERISA and the Code an amount that could reasonably be expected to
result in a Material Adverse Effect; no proceedings have been instituted to
terminate or appoint a trustee to administer any Plan which is subject to Title
IV of ERISA; no action, suit, proceeding, hearing, audit or investigation with
respect to the administration, operation or the investment of assets of any Plan
(other than routine claims for benefits) is pending, or, to the best knowledge
of the U.S. Borrower or any Subsidiary of the U.S. Borrower or any ERISA
Affiliate, expected or threatened which could reasonably be expected to result
in a Material Adverse Effect; using actuarial assumptions and computation
methods consistent with Part 1 of subtitle E of Title IV of ERISA, the aggregate
liabilities of the U.S. Borrower and its Subsidiaries and its ERISA Affiliates
to all Plans which are multiemployer plans (as defined in Section 4001(a)(3) of
ERISA) in the event of a complete withdrawal therefrom, as of the close of the
most recent fiscal year of each such Plan ended prior to the date of the most
recent Credit Event, would not exceed an amount that could reasonably be
expected to result in a Material Adverse Effect; each group health plan (as
defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) which
covers or has covered employees or former employees of the U.S. Borrower, any
Subsidiary of the U.S. Borrower, or any ERISA Affiliate has at all times
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been operated in substantial compliance with the provisions of Part 6 of
subtitle B of Title I of ERISA and Section 4980B of the Code, except to the
extent that any such failure to so comply could not reasonably be expected to
result in a Material Adverse Effect; no lien, not permitted by Section 9.01(i),
imposed under the Code or ERISA on the assets of the U.S. Borrower or any
Subsidiary of the U.S. Borrower or any ERISA Affiliate exists or, to the best
knowledge of the U.S. Borrower or any Subsidiary of the U.S. Borrower or any
ERISA Affiliate, is likely to arise on account of any Plan; and the U.S.
Borrower and its Subsidiaries do not maintain or contribute to any employee
welfare benefit plan (as defined in Section 3(1) of ERISA) which provides
benefits to retired employees or other former employees (other than as required
by Section 601 of ERISA) or any Plan the obligations with respect to which could
reasonably be expected to have a material adverse effect on the ability of the
U.S. Borrower to perform its obligations under this Agreement.
(b) Each Foreign Pension Plan has been maintained in compliance
with its terms and with the requirements of any and all applicable laws,
statutes, rules, regulations and orders and has been maintained, where required,
in good standing with applicable regulatory authorities except to the extent
that such a failure to comply could not reasonably be expected to result in a
Material Adverse Effect. All contributions required to be made with respect to a
Foreign Pension Plan have been timely made except to the extent that the failure
to make any such contribution could not reasonably be expected to result in a
Material Adverse Effect. Neither the U.S. Borrower nor any of its Subsidiaries
has incurred any obligation in connection with the termination of or withdrawal
from any Foreign Pension Plan an amount that could reasonably be expected to
result in a Material Adverse Effect. The present value of the accrued benefit
liabilities (whether or not vested) under each Foreign Pension Plan, determined
as of the end of the U.S. Borrower's most recently ended fiscal year on the
basis of actuarial assumptions, each of which is reasonable, did not exceed the
current value of the assets of such Foreign Pension Plan allocable to such
benefit liabilities by more than an amount that could reasonably be expected to
result in a Material Adverse Effect.
7.11 The Security Documents. (a) The provisions of the U.S.
Security Agreement are effective to create in favor of the Collateral Agent for
the benefit of the Secured Creditors a legal, valid and enforceable security
interest in all right, title and interest of the Credit Parties party thereto in
the U.S. Security Agreement Collateral described therein, subject to the
provisions of the U.S. Security Agreement, and the Collateral Agent, for the
benefit of the Secured Creditors, has a fully perfected first lien on, and
security interest in, all right, title and interest in all of the U.S. Security
Agreement Collateral described therein to the extent such pledge and security
interest can be perfected under the applicable UCC, subject to no other Liens
other than Permitted Liens. The recordation of the Assignment of Security
Interest in U.S. Patents and Trademarks in the form attached to the U.S.
Security Agreement in the United States Patent and Trademark Office together
with filings on Form UCC-1 made pursuant to the U.S. Security Agreement will
create a perfected security interest granted to the Collateral Agent in the
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trademarks and patents covered by the U.S. Security Agreement and the
recordation of the Assignment of Security Interest in U.S. Copyrights in the
form attached to the U.S. Security Agreement with the United States Copyright
Office together with filings on Form UCC-1 made pursuant to the U.S. Security
Agreement will create a perfected security interest granted to the Collateral
Agent in the copyrights covered by the U.S. Security Agreement.
(b) Subject to the last sentence of this Section 7.11(b) and the
provisions of Section 4 of the U.S. Pledge Agreement, the security interests
created in favor of the Collateral Agent, as Pledgee, for the benefit of the
Secured Creditors under the U.S Pledge Agreement constitute first priority
perfected security interests in the Collateral described in the U.S. Pledge
Agreement (as same exists on each date this representation and warranty is
made), subject to no security interests of any other Person. Notwithstanding
anything to the contrary contained above in this Section 7.11(b) or elsewhere in
this Agreement, so long as any Existing Senior Secured Notes remain outstanding,
the security interests described above arising pursuant to the U.S. Pledge
Agreement in any collateral which has been pledged or in which a security
interest has been granted to secure the Existing Senior Secured Notes shall be
subject to the prior security interests created in favor of the holders of the
Existing Senior Secured Notes; provided that at all times the security interests
created pursuant to the U.S. Pledge Agreement in all such collateral shall be
required to be fully perfected (pursuant to the Bailee Agreement or, after all
Existing Senior Secured Notes have been repaid in full, by delivery of the
relevant collateral to the Collateral Agent pursuant to the U.S. Pledge
Agreement).
(c) Subject to the terms of the Mortgages, the Mortgages (if any)
create, for the obligations purported to be secured thereby, a valid and
enforceable perfected security interest in and mortgage lien on all of the
Mortgaged Properties in favor of the Collateral Agent (or such other trustee as
may be required or desired under local law) for the benefit of the Secured
Creditors, superior to and prior to the rights of all third persons (except that
the security interest and mortgage lien created in the Mortgaged Properties may
be subject to the Permitted Encumbrances related thereto) and subject to no
other Liens (other than Liens permitted under Section 9.01). Schedule III
contains a true and complete list of each parcel of Real Property owned or
leased by the U.S. Borrower and its Subsidiaries on the Initial Borrowing Date,
and the type of interest therein held by the U.S. Borrower or such Subsidiary.
The U.S. Borrower and each of its Subsidiaries have good and marketable title to
all fee-owned Real Property and valid leasehold title to all Leaseholds, in each
case free and clear of all Liens except those described in the first sentence of
this subsection (c).
(d) Subject to the terms of the respective German Security
Documents, the security interests created in favor of the Collateral Agent for
the benefit of the Secured Creditors under the German Security Documents
constitute first priority perfected security
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interests in the assets pledged or in which a Lien is granted pursuant to the
German Security Documents (as same exists on each date this representation and
warranty is made), subject to no security interests of any other Person. No
filings or recordings are required in order to perfect (or maintain the
perfection or priority of) the security interests created in the assets charged
pursuant to the German Security Documents.
(e) Notwithstanding anything to the contrary contained above in
this Section 7.11 or in any of the Security Documents, the foregoing
representations and warranties shall not be deemed violated if at any time there
is a failure in perfection of the security interest in any Collateral as
otherwise provided above, so long as the aggregate fair market value of all
Collateral with respect to which such defects in perfection exist at any time
does not in the aggregate exceed $1,000,000. The provisions of the foregoing
sentence shall not excuse the U.S. Borrower or the other relevant Credit Parties
from taking such action as may be required to be taken by them in accordance
with the terms of the various Credit Documents.
7.12 Representations and Warranties in Other Documents. All
representations and warranties set forth in the Documents (other than the Credit
Documents) were true and correct in all material respects at the time as of
which such representations and warranties were made (or deemed made).
7.13 Properties. The U.S. Borrower and each of its Subsidiaries
have good and marketable title to all material properties owned by them,
including all property reflected in the financial statements referred to in
Sections 7.05(a) and (b) (except as sold or otherwise disposed of since the date
of such balance sheet in the ordinary course of business), free and clear of all
Liens, other than Liens permitted by Section 9.01.
7.14 Capitalization. On the Initial Borrowing Date (or on June
30, 1997 in the case of the U.S. Borrower), the authorized capital stock of (x)
the U.S. Borrower shall consist of (i) 175,000,000 shares of common stock, $.01
par value per share, of which approximately 31.8 million were on such date
issued and outstanding, (ii) 10,000,000 shares of Special Stock of which
approximately 124,000 shares of Series E Preferred Stock were on such date
issued and outstanding and of which approximately 754,000 shares of Existing PIK
Preferred Stock were on such date issued and outstanding, (y) Bally Wulff
Automaten shall consist of one share, in the nominal amount of DM 6,509,000,
held by the German Parent and (z) Bally Wulff Vertriebs shall consist of one
share, in the nominal amount of DM 37,190,000, held by the German Parent. All
such outstanding shares have been duly and validly issued, are fully paid and
nonassessable and are free of preemptive rights. Except for as disclosed on
Schedule XII, on the Initial Borrowing Date, neither the U.S. Borrower nor any
of its Subsidiaries has outstanding any securities convertible into or
exchangeable for its capital stock or outstanding any rights to subscribe for or
to purchase, or any options for the purchase of, or any agreement providing for
the issuance (contingent or otherwise) of, or any calls,
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commitments or claims of any character relating to, its capital stock.
7.15 Subsidiaries. Schedule IV correctly sets forth, as of the
Initial Borrowing Date and after giving effect to the Transaction, each
Subsidiary of the U.S. Borrower (including the full and correct legal name
thereof, the type of organization and jurisdiction under which it is organized),
and the direct and indirect ownership interests of the U.S. Borrower therein.
Schedule IV also includes an accurate organization chart showing the U.S.
Borrower, each of its Subsidiaries, and the direct and indirect ownership
interests therein, in each case as of the Initial Borrowing Date.
7.16 Compliance with Statutes, etc. Each Borrower and each of its
Subsidiaries is in compliance with all applicable statutes, regulations
(including, without limitation, all applicable Gaming Regulations) and orders
of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign (including, without limitation, all relevant Gaming
Authorities), in respect of the conduct of its business and the ownership of its
property (including applicable statutes, regulations, orders and restrictions
relating to the Gaming Business and environmental standards and controls),
except such noncompliances as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
7.17 Investment Company Act. Neither the U.S. Borrower nor any of
its Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
7.18 Public Utility Holding Company Act. Neither the U.S.
Borrower nor any of its Subsidiaries is a "holding company," or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
7.19 Environmental Matters. (a) Each Borrower and each of its
Subsidiaries have complied with, and on the date of such Credit Event are in
compliance with, all applicable Environmental Laws and the requirements of any
permits issued under such Environmental Laws. There are no pending or, to the
best knowledge of each Borrower, overtly threatened Environmental Claims against
any Borrower or any of its Subsidiaries (including any such Environmental Claim
arising out of the ownership or operation by any Borrower or any of its
Subsidiaries of any Real Property no longer owned by any Borrower or any of its
Subsidiaries) or, to the best knowledge of each Borrower, any Real Property
owned or operated by any Borrower or any of its Subsidiaries. There are no
facts, circumstances, conditions or occurrences with respect to the business or
operations of any Borrower or any of its Subsidiaries or any Real Property owned
or operated by any Borrower or any of its Subsidiaries (including any Real
Property formerly owned or operated by any Borrower or any of its Subsidiaries
but no
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longer owned by any Borrower or any of its Subsidiaries) or, to the best
knowledge of any Borrower, any real property adjoining or adjacent to any such
Real Property that would reasonably be expected (i) to form the basis of an
Environmental Claim against any Borrower or any of its Subsidiaries or any Real
Property owned or operated by any Borrower or any of its Subsidiaries, or (ii)
to cause any Real Property owned or operated by any Borrower or any of its
Subsidiaries to be subject to any restrictions on the ownership, occupancy or
transferability of such Real Property by any Borrower or any of its Subsidiaries
under any applicable Environmental Law.
(b) Hazardous Materials have not at any time been generated,
used, treated or stored on, or transported to or from, any Real Property owned
or operated by any Borrower or any of its Subsidiaries where such generation,
use, treatment, storage or transportation has violated or would reasonably be
expected to violate any applicable Environmental Law. Hazardous Materials have
not at any time been Released on or from any Real Property owned or operated by
any Borrower or any of its Subsidiaries where such Release has violated or would
reasonably be expected to violate any applicable Environmental Law.
(c) Notwithstanding anything to the contrary in this Section
7.19, the representations made in this Section 7.19 shall not be untrue unless
the aggregate effect of all violations, Environmental Claims, facts,
circumstances, conditions, occurrences, restrictions, failures and
noncompliances of the types described above would reasonably be expected to have
a Material Adverse Effect.
7.20 Labor Relations. No Borrower or any of its Subsidiaries is
engaged in any unfair labor practice that could reasonably be expected to have a
Material Adverse Effect. There is (i) no unfair labor practice complaint pending
against any Borrower, any of its Subsidiaries or, to the best knowledge of any
Borrower, overtly threatened against any of them, before the National Labor
Relations Board, and no grievance or arbitration proceeding arising out of or
under any collective bargaining agreement is so pending against any Borrower or
any of its Subsidiaries or, to the best knowledge of each Borrower, overtly
threatened against any of them, (ii) no strike, labor dispute, slowdown or
stoppage pending against any Borrower or any of its Subsidiaries or, to the best
knowledge of each Borrower, overtly threatened against any Borrower or any of
its Subsidiaries and, (iii) no payments are due and no circumstances exist which
might make any payment due by any of the German Subsidiaries under the
provisions of any law, statute, rule or regulation (relating to the U.S.
Borrower's or any of its Subsidiaries' labor practices) or any order, writ,
injunction or decree (relating to the U.S. Borrower's or any of its
Subsidiaries' labor practices) of any court or governmental instrumentality
except (with respect to any matter specified in clause (i), (ii) or (iii) above,
either individually or in the aggregate) such as could not reasonably be
expected to have a Material Adverse Effect.
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7.21 Patents, Licenses, Franchises and Formulas. Each Borrower
and each of its Subsidiaries owns, or has the right to use, all the patents,
trademarks, permits, service marks, trade names, copyrights, licenses,
franchises, proprietary information (including but not limited to rights in
computer programs and databases) and formulas, or rights with respect to the
foregoing, or has obtained assignments of all leases and other rights of
whatever nature, necessary for the present conduct of its business, without any
known conflict with the rights of others which, or the failure to obtain which,
as the case may be, could reasonably be expected to result in a Material Adverse
Effect.
7.22 Indebtedness. Schedule V sets forth a true and complete list
of all Indebtedness of the U.S. Borrower and its Subsidiaries as of the Initial
Borrowing Date and which is to remain outstanding after giving effect to the
Transaction (excluding the Loans, the Letters of Credit, the Existing Senior
Secured Notes, the New Senior Subordinated Notes and any Preferred Stock of the
U.S. Borrower which is to remain outstanding, the "Existing Indebtedness"), in
each case, showing the aggregate principal amount thereof and the name of the
respective borrower and any Credit Party or any of its Subsidiaries which
directly or indirectly guaranteed such debt and describing any security
therefor.
7.23 Transaction. At the time of consummation thereof, the
Transaction shall have been consummated in all material respects in accordance
with the terms of the respective Documents and all applicable laws. At the time
of consummation thereof, except as specifically set forth on Schedule X, all
material consents and approvals of, and filings and registrations with, and all
other actions in respect of, all governmental agencies, authorities or
instrumentalities required in order to make or consummate the Transaction to the
extent then required have been obtained, given, filed or taken and are or will
be in full force and effect (or effective judicial relief with respect thereto
has been obtained). Except as specifically set forth on Schedule X, all
applicable waiting periods with respect thereto have or, prior to the time when
required, will have, expired without, in all such cases, any action being taken
by any competent authority which restrains, prevents, or imposes material
adverse conditions upon the Transaction. Additionally, there does not exist any
judgment, order or injunction prohibiting or imposing material adverse
conditions upon the Transaction, or the occurrence of any Credit Event or the
performance by any Credit Party of its obligations under the Documents to which
it is party.
7.24 Existing Senior Secured Notes. At the time of consummation
thereof, the Existing Senior Secured Notes Tender Offer/Consent Solicitation
shall have been consummated in all material respects in accordance with the
terms of the respective Documents therefor and all applicable laws. At the time
of consummation thereof, all consents and approvals of, and filings and
registrations with, and all other actions in respect of, all governmental
agencies, authorities or instrumentalities required in order to make or
consummate the Existing Senior Secured Notes Tender Offer/Consent Solicitation
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shall have been obtained, given, filed or taken or waived and are or will be in
full force and effect (or effective judicial relief with respect thereto has
been obtained). All applicable waiting periods with respect thereto have or,
prior to the time when required, will have, expired without, in all such cases,
any action being taken by any competent authority which restrains, prevents, or
imposes material adverse conditions upon the Existing Senior Secured Notes
Tender Offer/Consent Solicitation. Additionally, there shall not exist any
judgment, order or injunction prohibiting or imposing material adverse
conditions upon the Existing Senior Secured Notes Tender Offer/Consent
Solicitation, or the performance by the U.S. Borrower of its obligations under
the respective Documents therefor and all applicable laws.
7.25 Specified Inactive Subsidiaries and Specified Non-Material
Subsidiaries. (a) On the Initial Borrowing Date, the aggregate assets and
liabilities (other than liabilities owed by the respective Specified Inactive
Subsidiary to the U.S. Borrower or any Subsidiary of the U.S. Borrower which
owns a direct or indirect equity interest in the respective Specified Inactive
Subsidiary) of all Specified Inactive Subsidiaries does not exceed $1,000,000.
(b) The aggregate book value or fair market value (as determined
in good faith by the U.S. Borrower), whichever is greater, of all assets of each
Specified Non-Material Subsidiary is less than $5,000,000. Furthermore, the
aggregate book value or fair market value (as determined in good faith by the
U.S. Borrower), whichever is greater, of all assets of all Specified
Non-Material Subsidiaries is less than $15,000,000.
7.26 Existing Senior Secured Notes Collateral. Schedule XIII is
an accurate and complete (in all material respects) list of all collateral, as
of the Initial Borrowing Date, which is held by the trustee under the Existing
Senior Secured Notes Indenture, or any other agent, sub-agent, collateral agent
or other custodian for the benefit of the holders of the Existing Senior Secured
Notes, which schedule lists the respective collateral and identifies the Person
or Persons which have custody of same.
7.27 Margin Stock. On the Initial Borrowing Date, the aggregate
fair market value of all Margin Stock owned by the U.S. Borrower and its
Subsidiaries does not exceed $100,000.
SECTION 8. Affirmative Covenants. Each Borrower hereby covenants
and agrees that on and after the Effective Date and until the Total Commitments
and all Letters of Credit have terminated and the Loans, Notes and Unpaid
Drawings, together with interest, Fees and all other Obligations (other than
contingent indemnification obligations) incurred hereunder and thereunder, are
paid in full:
8.01 Information Covenants. The Borrowers will furnish to the
Administrative Agent (with sufficient copies for distribution to each of the
Lenders):
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(a) Monthly Reports. Within 40 days (or 45 days in the case of
the first twelve fiscal months ended after the Initial Borrowing Date)
after the end of each fiscal month of the U.S. Borrower, the
consolidated balance sheet of each of (x) the U.S. Borrower and its
Subsidiaries and (y) the German Parent and its Subsidiaries (other than
Bally Gaming International GmbH), each as at the end of such fiscal
month and the related statements (consolidated, in the case of the U.S.
Borrower and the German Parent) of income for such fiscal month and for
the elapsed portion of the fiscal year ended with the last day of such
fiscal month, in each case, setting forth comparative figures for the
corresponding fiscal month in the prior fiscal year and comparable
budgeted income figures for such fiscal month (except that, in the case
of balance sheets, such comparison shall be to the last day of the prior
fiscal year).
(b) Quarterly Financial Statements. Within 45 days after the
close of the first three quarterly accounting periods in each fiscal
year of the U.S. Borrower, (i) the consolidated and consolidating
balance sheets of the U.S. Borrower and its Subsidiaries, as at the end
of such quarterly accounting period, and the related consolidated and,
in the case of income statements only, consolidating statements of
income and retained earnings and statement of cash flows for such
quarterly accounting period (in the case of the statements of income and
retained earnings) and for the elapsed portion of the fiscal year (in
each case) ended with the last day of such quarterly accounting period,
in each case setting forth comparative figures for the related periods
in the prior fiscal year (except that, in the case of balance sheets,
such comparison shall be to the last day of the prior fiscal year), all
of which shall be certified by the chief financial officer of the U.S.
Borrower, subject to normal year-end audit adjustments and the absence
of footnotes and (ii) management's discussion and analysis of the
important operational and financial developments during the quarterly
and year-to-date periods.
(c) Annual Financial Statements. Within 90 days after the close
of each fiscal year of the U.S. Borrower, (i) the consolidated and
consolidating balance sheets of the U.S. Borrower and its Subsidiaries,
as at the end of such fiscal year, and the related consolidated and, in
the case of income statements only, consolidating statements of income
and retained earnings and of cash flows for such fiscal year setting
forth comparative figures for the preceding fiscal year and certified
(x) in the case of the consolidating financial statements, by the chief
financial officer of the U.S. Borrower and (y) in the case of the
consolidated financial statements, by independent certified public
accountants of recognized national standing reasonably acceptable to the
Administrative Agent, together with a report of such accounting firm
stating that in the course of its regular audit of the respective
financial statements, which audit was conducted in accordance with
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generally accepted auditing standards, nothing came to the attention of
such accountants that caused them to believe that the U.S. Borrower was
not in compliance with any of Sections 4.02(f) or 9, insofar as such
Sections relate to accounting matters, or, if in the opinion of such
accounting firm any such non-compliance has occurred and is continuing,
a statement as to the nature thereof and (ii) management's discussion
and analysis of the important operational and financial developments
during the respective fiscal year.
(d) Management Letters. Promptly after the U.S. Borrower's or any
of its Subsidiaries' receipt thereof, a copy of any "management letter"
addressed to the board of directors of the U.S. Borrower or such
Subsidiary from its certified public accountants and the management's
responses thereto.
(e) Budgets. No later than 30 days after the first day of each
fiscal year (or not later than September 15, 1997, for the fiscal year
ended June 30, 1998) of the U.S. Borrower, a budget in form satisfactory
to the Administrative Agent and the Required Lenders (including budgeted
statements of income and sources and uses of cash and balance sheets)
prepared by the U.S. Borrower for (x) each of the months of such fiscal
year prepared in reasonable detail (although budgeted statements of
sources and uses of cash and balance sheets shall be prepared on a
quarterly (or annual in the case of the budget for the fiscal year ended
June 30, 1998) basis only) and (y) the immediately following fiscal year
prepared in summary form, in each case accompanied by the statement of
the chief financial officer of the U.S. Borrower to the effect that, to
the best of his knowledge, the budget is a reasonable estimate for the
period covered thereby.
(f) Officer's Certificates. At the time of the delivery of the
financial statements provided for in Sections 8.01(b) and (c), a
certificate of the chief financial officer of the U.S. Borrower to the
effect that, to the best of such officer's knowledge, no Default or
Event of Default has occurred and is continuing or, if any Default or
Event of Default has occurred and is continuing, specifying the nature
and extent thereof, which certificate shall (w) contain a calculation of
the Cumulative Net Income Amount as of the last day of such fiscal
quarter or year, as the case may be, showing in reasonable detail the
accretions thereto and deductions therefrom, in each case in accordance
with the definition of Cumulative Net Income Amount contained herein,
during the respective fiscal quarter or year, as the case may be, (x)
set forth in reasonable detail the calculations required to establish
whether the U.S. Borrower and its Subsidiaries were in compliance with
the provisions of Section 4.02(f) (to the extent delivered with the
financial statements required by Section 8.01(c)), 9.03, 9.04, 9.05 and
9.07 through 9.11, inclusive, at the end of such fiscal quarter or year,
as the case may be, (y) if delivered with the financial statements
required by Section 8.01(c), set forth in reasonable detail the amount
of Excess Cash Flow for the Excess Cash Payment
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Period and (z) contain a list of all Specified Inactive Subsidiaries in
existence, and a list of all Specified Non-Material Subsidiaries, as of
the last day of the immediately preceding fiscal quarter or year, as
the case may be, and containing calculations required to establish
whether the respective Subsidiaries so designated as Specified
Non-Material Subsidiaries continue to qualify as such in accordance
with the definition of Specified Non-Material Subsidiaries contained
herein.
(g) Notice of Default or Litigation. Promptly, and in any event
within three Business Days (or ten Business Days in the case of
following clause (ii)) after any Knowledgeable Officer of any Borrower
obtains actual knowledge thereof, notice of (i) the occurrence of any
event which constitutes a Default or an Event of Default and (ii) any
litigation or governmental investigation or proceeding pending (x)
against the U.S. Borrower or any of its Subsidiaries which, if adversely
determined, could reasonably be expected to have a Material Adverse
Effect, (y) with respect to any material Indebtedness of the U.S.
Borrower or any of its Subsidiaries or (z) with respect to any Document.
(h) Other Reports and Filings. Promptly after the filing or
delivery thereof, copies of all financial information, proxy materials
and reports, if any, which the U.S. Borrower or any of its Subsidiaries
shall publicly file with the Securities and Exchange Commission or any
successor thereto (the "SEC") or the Federal Supervisory Office for
Securities Trading (Bundesaufsichtsamt fur den Wertpapierhandel) or
shall deliver to its shareholders or to holders of its Indebtedness (but
only if the respective issue of Indebtedness is in excess of $10,000,000
outstanding principal amount or, if less, the notice relates to a
default or event of default under the respective Indebtedness) pursuant
to the terms of the documentation governing such Indebtedness (or any
trustee, agent or other representative therefor).
(i) Environmental Matters. Promptly upon, and in any event within
ten Business Days after, any Knowledgeable Officer of any Borrower
obtains knowledge thereof, notice of one or more of the following
environmental matters, unless such environmental matters would not,
individually or when aggregated with all other such environmental
matters, be reasonably expected to have a Material Adverse Effect:
(i) any pending or threatened Environmental Claim
against the U.S. Borrower or any of its Subsidiaries or any Real
Property owned or operated by the U.S. Borrower or any of its
Subsidiaries;
(ii) any condition or occurrence on or arising from any
Real Property owned or operated by the U.S. Borrower or any of
its Subsidiaries that (a) results in noncompliance by the U.S.
Borrower or any of its
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Subsidiaries with any applicable Environmental Law or (b)
would reasonably be expected to form the basis of an
Environmental Claim against the U.S. Borrower or any of its
Subsidiaries or any such Real Property;
(iii) any condition or occurrence on any Real Property
owned or operated by the U.S. Borrower or any of its Subsidiaries
that would reasonably be expected to cause such Real Property to
be subject to any restrictions on the ownership, occupancy, use
or transferability by the U.S. Borrower or any of its
Subsidiaries of such Real Property under any Environmental Law;
and
(iv) the taking of any removal or remedial action in
response to the actual or alleged presence of any Hazardous
Material on any Real Property owned or operated by the U.S.
Borrower or any of its Subsidiaries as required by any
Environmental Law or any governmental or other administrative
agency (with the items described above in preceding clauses (i)
through (iv) being herein called, collectively, "Environmental
Matters").
All such notices shall describe in reasonable detail the nature
of the respective Environmental Matter and the U.S. Borrower's or such
Subsidiary's intended response thereto. In addition, the U.S. Borrower or any of
its Subsidiaries will provide the Administrative Agent (with sufficient copies
for distribution to each of the Lenders) with copies of all communications
between the U.S. Borrower or any of its Subsidiaries and any government or
governmental agency relating to Environmental Laws which would reasonably be
expected to have a Material Adverse Effect, all notices of any Environmental
Claims, and such detailed reports of any outstanding Environmental Claim as may
reasonably be requested by the Lenders; provided, that in any event the U.S.
Borrower and its Subsidiaries shall deliver to the Administrative Agent (with
sufficient copies for distribution to each of the Lenders) all notices received
by the U.S. Borrower or any of its Subsidiaries from any government or
governmental agency under, or pursuant to, CERCLA which identify the U.S.
Borrower or any of its Subsidiaries as potentially responsible parties for
response costs or which otherwise notify the U.S. Borrower or any of its
Subsidiaries of potential liability under CERCLA.
(j) Borrowing Base Certificates. (i) On the Initial Borrowing
Date and (ii) no later than 10:00 a.m. (New York time or Frankfurt time, as
appropriate) on the 40th day (or 45th day in the case of the first 12 calendar
months ended after the Initial Borrowing Date) after the last day of each
calendar month, a borrowing base certificate of (a) the U.S. Borrower in the
form of Exhibit N-1 and (b) the German Borrowers in the form of Exhibit N-2
(each a "Borrowing Base Certificate"), with respect to the Eligible Receivables
and Eligible Inventory of the respective Borrower or Borrowers (and (x) the
Wholly-Owned U.S. Subsidiary Guarantors, in the case of a Borrowing Base
Certificate
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delivered by the U.S. Borrower and (y) Bally Gaming International
GmbH, in the case of a Borrowing Base Certificate delivered by the German
Borrowers) as of (x) in the case of clause (i), June 30, 1997 (after giving
effect to the transactions contemplated hereby and by the other Credit
Documents) and (y) in the case of clause (ii), the last day of such calendar
month, and in all such cases, certified by the chief financial officer of the
respective Borrower or Borrowers.
(k) Annual Meetings with Lenders. At the request of the
Administrative Agent, at a date to be mutually agreed upon between the
Administrative Agent and the U.S. Borrower occurring on or prior to the 120th
day after the close of each fiscal year of the U.S. Borrower, the U.S. Borrower
shall hold a meeting with all of the Lenders at which meeting shall be reviewed
the financial results of the previous fiscal year and the financial condition of
the U.S. Borrower and its Subsidiaries and the budgets presented for the current
fiscal year of the U.S. Borrower and its Subsidiaries.
(l) Other Information. From time to time, such other information
or documents (financial or otherwise) with respect to the U.S. Borrower or any
of its Subsidiaries as any Lender may reasonably request, including, without
limitation, copies of financial reports or documents filed by the U.S. Borrower
or any of its Subsidiaries with any Gaming Authority.
8.02 Books, Records and Inspections. Each Borrower will, and will
cause each of its Subsidiaries to, keep proper books of record and accounts in
which full, true and correct entries in conformity with generally accepted
accounting principles and all requirements of law shall be made of all dealings
and transactions in relation to its business and activities. Upon prior notice,
each Borrower will, and will cause each of its Subsidiaries to, permit officers
and designated representatives of the Administrative Agent or any Lender to
visit and inspect, during regular business hours and under guidance of officers
of the U.S. Borrower or such Subsidiary, any of the properties of the U.S.
Borrower or such Subsidiary, and to examine the books of account of the U.S.
Borrower or such Subsidiary and discuss the affairs, finances and accounts of
the U.S. Borrower or such Subsidiary with, and be advised as to the same by, its
and their officers and independent accountants, all at such reasonable times and
intervals and to such reasonable extent as the Administrative Agent or such
Lender may request.
8.03 Maintenance of Property; Insurance. (a) Schedule VI sets
forth a true and complete listing of all insurance maintained by the U.S.
Borrower and its Subsidiaries as of the Initial Borrowing Date. Each Borrower
will, and will cause each of its Subsidiaries to, (i) keep all property
necessary to the business of the U.S. Borrower and its Subsidiaries in
reasonably good working order and condition, ordinary wear and tear excepted,
(ii) maintain insurance on all such property in at least such amounts and
against at least such risks as is consistent and in accordance with industry
practice for companies similarly situated owning similar properties in the same
general areas in which
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the U.S. Borrower or any of its Subsidiaries operates, and (iii) furnish to the
Administrative Agent or any Lender, upon written request, full information as to
the insurance carried.
(b) The U.S. Borrower will, and will cause each of its
Subsidiaries to, at all times keep its property insured in favor of the
Collateral Agent, and all policies or certificates (or certified copies thereof)
with respect to such insurance (and any other insurance maintained by the U.S.
Borrower and/or its Subsidiaries) (i) shall be endorsed to the Collateral
Agent's satisfaction for the benefit of the Collateral Agent (including, without
limitation, by naming the Collateral Agent as loss payee and/or additional
insured), (ii) shall state that such insurance policies shall not be cancelled
or revised without at least 30 days' prior written notice thereof by the
respective insurer to the Collateral Agent, (iii) shall provide that the
respective insurers irrevocably waive any and all rights of subrogation with
respect to the Collateral Agent and the Secured Creditors, (iv) shall contain
the standard non-contributing mortgage clause endorsement in favor of the
Collateral Agent with respect to hazard liability insurance, (v) shall provide
that any losses shall be payable notwithstanding (A) any act or neglect of the
U.S. Borrower or any of its Subsidiaries, (B) the occupation or use of the
properties for purposes more hazardous than those permitted by the terms of the
respective policy if such coverage is obtainable at commercially reasonable
rates and is of the kind from time to time customarily insured against by
Persons owning or using similar property and in such amounts as are customary,
(C) any foreclosure or other proceeding relating to the insured properties or
(D) any change in the title to or ownership or possession of the insured
properties and (vi) shall provide that all proceeds thereof shall be deposited
with the Collateral Agent (although such proceeds received thereunder shall be
permitted to be used by the U.S. Borrower and its Subsidiaries to the extent
provided in Section 4.02(g)). Except as may otherwise be specifically agreed
from time to time by the Collateral Agent, copies of all insurance policies and
certificates from time to time maintained by the U.S. Borrower and its
Subsidiaries, as described above, shall be furnished to the Collateral Agent by
the U.S. Borrower promptly after same are obtained by the U.S. Borrower or one
or more of its Subsidiaries.
(c) If the U.S. Borrower or any of its Subsidiaries shall fail to
insure its property in accordance with this Section 8.03, or if the U.S.
Borrower, or any of its Subsidiaries shall fail to so endorse all policies or
certificates with respect thereto as provided in this Section 8.03, the
Collateral Agent shall have the right (but shall be under no obligation), upon
10 Business Days' prior notice to the U.S. Borrower, to procure such insurance
and the U.S. Borrower agrees to reimburse the Collateral Agent for all costs and
expenses of procuring such insurance.
8.04 Corporate Franchises. Each Borrower will, and will cause
each of its Subsidiaries to, do or cause to be done, all things necessary to
preserve and keep in full force and effect its existence and its material
rights, franchises, licenses and patents;
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provided, however, that nothing in this Section 8.04 shall prevent (i)
transactions permitted under Sections 8.14 and 9.02, (ii) the withdrawal by the
U.S. Borrower or any of its Subsidiaries of its qualification as a foreign
corporation in any jurisdiction where such withdrawal could not reasonably be
expected to have a Material Adverse Effect or (iii) the liquidation or
dissolution of any other Subsidiary that no longer conducts any business and the
aggregate assets (taken at fair market value as determined in good faith by the
U.S. Borrower) and liabilities (taking the reasonable probable liability in the
case of any contingent obligations) of which are less than $100,000.
8.05 Compliance with Statutes, etc. Each Borrower will, and will
cause each of its Subsidiaries to, comply with all applicable statutes,
regulations (including without limitation all applicable Gaming Regulations) and
orders of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign (including without limitation all relevant Gaming
Authorities), in respect of the conduct of its business and the ownership of its
property (including applicable statutes, regulations, orders and restrictions
relating to the Gaming Business and environmental standards and controls),
except such noncompliances as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
8.06 Compliance with Environmental Laws. (a) Each Borrower will
comply, and will cause each of its Subsidiaries to comply, with all
Environmental Laws applicable to the ownership or use of its Real Property now
or hereafter owned or operated by the U.S. Borrower or any of its Subsidiaries,
except for any non-compliance that could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, will promptly pay or
cause to be paid all costs and expenses incurred in connection with such
compliance, and will keep or cause to be kept all such Real Property free and
clear of any Liens (except Permitted Liens) imposed pursuant to such
Environmental Laws. No Borrower nor any of its Subsidiaries will generate, use,
treat, store, release or dispose of, or permit the generation, use, treatment,
storage, release or disposal of Hazardous Materials on any Real Property now or
hereafter owned or operated by the U.S. Borrower or any of its Subsidiaries, or
transport or permit the transportation of Hazardous Materials to or from any
such Real Property, except for Hazardous Materials generated, used, treated,
stored, released or disposed of at any such Real Properties in compliance in all
material respects with all applicable Environmental Laws and as is reasonably
required in connection with the operation, use and maintenance of the business
or operations of the U.S. Borrower or any of its Subsidiaries.
(b) At the written request of the Administrative Agent or the
Required Lenders, which request shall specify in reasonable detail the basis
therefor, at any time and from time to time, the U.S. Borrower will provide, at
its sole cost and expense, an environmental site assessment report concerning
any Real Property owned or operated by the U.S. Borrower and its Subsidiaries,
prepared by an environmental consulting firm reasonably acceptable to the
Administrative Agent, indicating the presence or absence of
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Hazardous Materials and the estimated reasonably likely cost of any removal or
remedial action required under Environmental Laws in connection with such
Hazardous Materials on such Real Property, provided that in no event shall such
request be made more often than once every two years for any particular Real
Property unless either (i) an Event of Default shall be in existence or (ii) the
Lenders receive notice under Section 8.01(i) of any Environmental Matter for
which notice is required to be delivered for any such Real Property. If the U.S.
Borrower fails to provide the same within ninety days after such request was
made, the Administrative Agent may order the same, the cost of which shall be
borne by the U.S. Borrower, and the U.S. Borrower shall grant and hereby grants
to the Administrative Agent and the Lenders and their agents access to such Real
Property and specifically grant the Administrative Agent and the Lenders an
irrevocable non-exclusive license, subject to the rights of tenants, to
undertake such an assessment using a nationally recognized environmental
consulting firm reasonably acceptable to the U.S. Borrower at any reasonable
time upon reasonable notice to the U.S. Borrower, all at the sole costs and
reasonable expense of the U.S. Borrower.
8.07 ERISA. As soon as reasonably practicable and, in any event,
within fifteen (15) days after any Knowledgeable Officer of the U.S. Borrower
obtains actual knowledge of the occurrence of any of the following, to the
extent that the same could reasonably be expected to have a Material Adverse
Effect, either individually or in the aggregate, the U.S. Borrower will deliver
to the Administrative Agent a notice setting forth the reasonable details as to
such occurrence and the action, if any, that the U.S. Borrower, any Subsidiary
or any ERISA Affiliate is required or proposes to take, together with any
notices required or proposed to be given to or filed with or by the U.S.
Borrower, the Subsidiary, the ERISA Affiliate, the PBGC, a Plan participant or
the Plan administrator with respect thereto: that a Reportable Event has
occurred (except to the extent that the U.S. Borrower has previously delivered
to the Lenders a notice (if any) concerning such event pursuant to the next
clause hereof); that a contributing sponsor (as defined in Section 4001(a)(13)
of ERISA) of a Plan subject to Title IV of ERISA is subject to the advance
reporting requirement of PBGC Regulation Section 4043.61 (without regard to
subparagraph (b)(1) thereof), and an event described in subsection .62, .63,
.64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 is reasonably expected
to occur with respect to such Plan within the following 30 days; that an
accumulated funding deficiency, within the meaning of Section 412 of the Code or
Section 302 of ERISA, has been incurred or an application may reasonably be
expected to be or has been made for a waiver or modification of the minimum
funding standard (including any required installment payments) or an extension
of any amortization period under Section 412 of the Code or Section 303 or 304
of ERISA with respect to a Plan; that any contribution required to be made with
respect to a Plan or Foreign Pension Plan has not been timely made; that a Plan
has been or may be terminated, reorganized, partitioned or declared insolvent
under Title IV of ERISA; that a Plan has an Unfunded Current Liability; that
proceedings may reasonably be expected to be or have been instituted to
terminate or appoint a trustee to administer a Plan which is subject to Title IV
of ERISA; that a
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proceeding has been instituted pursuant to Section 515 of ERISA to collect a
delinquent contribution to a Plan which proceeding is not dismissed within (30)
days of the institution of such proceeding; that the U.S. Borrower, any
Subsidiary of the U.S. Borrower or any ERISA Affiliate will or may reasonably be
expected to incur any liability (including any indirect, contingent, or
secondary liability) to or on account of the termination of or withdrawal from a
Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with
respect to a Plan under Section 401(a)(29), 4971, 4975 or 4980 of the Code or
Section 409 or 502(i) or 502(l) of ERISA or with respect to a group health plan
(as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under
Section 4980B of the Code; or that the U.S. Borrower or any Subsidiary of U.S.
Borrower may reasonably be expected to incur any liability pursuant to any
employee welfare benefit plan (as defined in Section 3(1) of ERISA) that
provides benefits to retired employees or other former employees (other than as
required by Section 601 of ERISA) or any Plan or any Foreign Pension Plan. Upon
request by the respective Lender, the U.S. Borrower will deliver to such Lender
(i) a complete copy of the annual report (on Internal Revenue Service Form
5500-series) of each Plan (including, to the extent required, the related
financial and actuarial statements and opinions and other supporting statements,
certifications, schedules and information) required to be filed with the
Internal Revenue Service and (ii) copies of any records, documents or other
information that must be furnished to the PBGC with respect to any Plan pursuant
to Section 4010 of ERISA. In addition to any certificates or notices delivered
to the Lenders pursuant to the first sentence hereof, copies of any material
notices received from the PBGC by the U.S. Borrower, any Subsidiary of the U.S.
Borrower or any ERISA Affiliate with respect to any Plan or Foreign Pension Plan
shall be delivered to the Lenders no later than fifteen (15) days after the date
such notice has been received by the U.S. Borrower, such Subsidiary or the ERISA
Affiliate, as applicable.
8.08 End of Fiscal Years; Fiscal Quarters. Each Borrower will
cause (i) each of its, and each of its Subsidiaries', fiscal years to end on
June 30 (except that the U.S. Borrower may elect to change its, and its
Subsidiaries', fiscal year ends to December 31, in which event (x) a short
fiscal year shall exist as a result of such election (which fiscal year shall
end on the respective December 31 and shall begin on the prior July 1) and (y)
at all times thereafter, each such fiscal year of each Borrower and each of its
Subsidiaries shall be required to end on a December 31), and (ii) each of its,
and each of its Subsidiaries' fiscal quarters to end on September 30, December
31, March 31 and June 30. Notwithstanding anything to the contrary contained
elsewhere in this Agreement, in the event the U.S. Borrower changes its fiscal
year as provided above, then in each instance in this Agreement where basket or
other amounts are expressly permitted to be incurred or remain outstanding on a
fiscal year basis, the amount shall be appropriately reduced on a proportionate
basis for the respective short fiscal year resulting from the actions taken as
described above.
8.09 Obtaining Approvals. Each Borrower will, and will cause each
of its
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Subsidiaries to, use their respective best efforts to obtain all approvals
listed on Schedule X as soon as practicable following the Initial Borrowing
Date. Furthermore, if at any time any approval of any Gaming Authority or any
other governmental or similar approval is required in connection with the
execution, delivery or performance of any Credit Document, or the taking by the
Administrative Agent, the Collateral Agent or any Secured Creditors of any
remedial action pursuant thereto, then each of the Borrowers shall, and shall
cause the respective Subsidiaries to, use their best efforts to obtain any such
approvals, upon request from the Administrative Agent, the Collateral Agent or
the Required Lenders.
8.10 Payment of Taxes. Each Borrower will, and will cause each of
its Subsidiaries to, pay and discharge, or cause to be paid and discharged, all
material taxes, assessments and governmental charges or levies imposed upon it
or upon its income or profits, or upon any properties belonging to it, in each
case on a timely basis, and all material lawful claims which, if unpaid, might
become a lien or charge upon any properties of the U.S. Borrower or any of its
Subsidiaries; provided that neither the U.S. Borrower nor any of its
Subsidiaries will be required to pay any such tax, assessment, charge, levy or
claim which is being contested in good faith and by appropriate proceedings if
it has maintained adequate reserves with respect thereto in accordance with
generally accepted accounting principles.
8.11 Additional Security; Further Assurances; etc. (a) The U.S.
Borrower will, and will cause each of the other Credit Parties to, (x) grant to
the Collateral Agent security interests and mortgages in such assets and
properties of the Credit Parties as are not covered by the original Security
Documents and (y) enter into any additional security documentation as may be
deemed by the Administrative Agent or the Required Lenders as necessary or
desirable (including, in the case of any pledge of stock of, or assets by, a
Foreign Subsidiary, such additional documentation or actions requested under the
relevant local law of the jurisdiction of organization of the Foreign Subsidiary
as may be requested), in each case as may be reasonably requested from time to
time by the Administrative Agent or the Required Lenders (collectively, together
with any security documents entered into pursuant to the other provisions of
this Section 8.11 or pursuant to Section 8.12, the "Additional Security
Documents"). Notwithstanding anything to the contrary contained above in this
clause (b), in no event will (i) the U.S. Borrower or any U.S. Subsidiary
Guarantor be required to pledge a greater percentage of the voting stock of any
Foreign Subsidiary, in support of Obligations of the U.S. Borrower, than is
originally provided in the U.S. Pledge Agreement, except to the extent otherwise
required by following Section 8.12, (ii) any German Subsidiary Guarantor or
German Borrower be required to grant a security interest in its assets in
support of Obligations of the U.S. Borrower, except to the extent otherwise
required by following Section 8.12 or (iii) any security interest be required to
be granted pursuant to this Section 8.11(b) to the extent same would violate
applicable law. To the extent the granting of a security interest in any assets,
properties or equity interests is not permitted by reason of clause (iii) of the
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immediately preceding sentence, at the request of the Administrative Agent or
Required Lenders, the U.S. Borrower will, and will cause each of the other
Credit Parties to, take all action as may be reasonably requested to obtain any
necessary approvals or to isolate the assets which would give rise to the
respective violation, or cause the respective Gaming Regulations to apply, in a
special purpose Subsidiary of the U.S. Borrower, as is intended to be done with
the Missouri License Subsidiary pursuant to Section 13.18.
(b) All security interests and mortgages created as required by
this Section 8.11 shall be granted pursuant to documentation in form and
substance (and shall be governed by law) reasonably satisfactory to the
Administrative Agent and shall constitute (after giving effect to any filings or
recording required in accordance with applicable law, which filings and
recordings shall be required to be made) valid and enforceable perfected
security interests and mortgages superior to and prior to the rights of all
third Persons (and subject to no other Liens) except for any such rights or
Liens constituting Permitted Liens. The Additional Security Documents or
instruments related thereto shall have been duly recorded or filed in such
manner and in such places as are required by law to establish, perfect, preserve
and protect the Liens in favor of the Collateral Agent required to be granted
pursuant to the Additional Security Documents and all taxes, fees and other
charges payable in connection therewith shall have been paid in full by the U.S.
Borrower or their respective Subsidiaries.
(c) The U.S. Borrower will, and will cause each of its
Subsidiaries to, at the expense of the U.S. Borrower and its Subsidiaries, make,
execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from
time to time such schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, real
property surveys, reports and other assurances or instruments, and take such
further steps relating to the collateral covered by any of the Security
Documents, as the Collateral Agent may reasonably require in order to effect,
protect or further evidence the grant or perfection of Liens provided for in the
Security Documents, provided that in no event shall the U.S. Borrower be
required to obtain any consent from Bally Entertainment Corporation.
Furthermore, the U.S. Borrower will cause to be delivered to the Collateral
Agent such opinions of counsel, title insurance and other related documents as
may be reasonably requested by the Administrative Agent to assure themselves
that this Section 8.11 has been complied with.
(d) The U.S. Borrower agrees that each action required above by
this Section 8.11 shall be completed within 30 days (or (x) 60 days if the
Administrative Agent agrees to such longer period in a specific instance or (y)
in any case, such longer period as may be required under local law or as may be
necessary to obtain required governmental approvals) after such action is either
requested to be taken by the Administrative Agent or the Required Lenders or
required to be taken by the U.S. Borrower and its Subsidiaries pursuant to the
terms of this Section 8.11. It is understood that the foregoing provisions of
this Section 8.11 are subject to the provisions of Section 13.18.
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8.12 Foreign Subsidiaries Security. If following a change in the
relevant sections of the Code or the regulations, rules, rulings, notices or
other official pronouncements issued or promulgated thereunder, the U.S.
Borrower does not cause Milbank, Tweed, Hadley & McCloy or such other counsel
for the U.S. Borrower as may be reasonably acceptable to the Administrative
Agent, within 30 days after a request from the Administrative Agent or the
Required Lenders, to deliver evidence, in form and substance mutually
satisfactory to the Administrative Agent and the U.S. Borrower, with respect to
any Foreign Subsidiary of the U.S. Borrower, that (i) a pledge of 66-2/3% or
more of the total combined voting power of all classes of capital stock of such
Foreign Subsidiary entitled to vote, (ii) the entering into by such Foreign
Subsidiary of a security agreement in substantially the form of the U.S.
Security Agreement and (iii) the entering into by such Foreign Subsidiary of a
guaranty in substantially the form of the U.S. Subsidiaries Guaranty, in each
case in support of Obligations of the U.S. Borrower pursuant to this Agreement,
would cause the undistributed earnings of such Foreign Subsidiary as determined
for Federal income tax purposes to be treated as a deemed dividend to such
Foreign Subsidiary's United States parent for Federal income tax purposes, then
in the case of a failure to deliver the evidence described in clause (i) above,
that portion of such Foreign Subsidiary's outstanding capital stock so issued by
such Foreign Subsidiary, in each case not theretofore pledged pursuant to the
U.S. Pledge Agreement in respect of all Obligations shall be pledged to the
Collateral Agent for the benefit of the Secured Creditors pursuant to the U.S.
Pledge Agreement in respect of all Obligations (or another pledge agreement in
substantially similar form, if needed), and in the case of a failure to deliver
the evidence described in clause (ii) above, such Foreign Subsidiary will
execute and deliver the U.S. Security Agreement (or another security agreement
in substantially similar form, if needed), granting the Secured Creditors a
security interest in all of such Foreign Subsidiary's assets and securing the
Obligations of all Borrowers under the Credit Documents and under any Interest
Rate Protection Agreement or Other Hedging Agreement and, in the event that the
respective Foreign Subsidiary shall have executed and delivered a Guaranty, the
obligations of such Foreign Subsidiary thereunder, and in the case of a failure
to deliver the evidence described in clause (iii) above, such Foreign Subsidiary
will execute and deliver the U.S. Subsidiaries Guaranty (or another guaranty in
substantially similar form, if needed), guaranteeing the Obligations of all
Borrowers under the Credit Documents and under any Interest Rate Protection
Agreement or Other Hedging Agreement, in each case to the extent that the
entering into of the respective security documents or guaranty is permitted by
the laws of the respective foreign jurisdiction and with all documents delivered
pursuant to this Section 8.12 to be in form and substance reasonably
satisfactory to the Administrative Agent. Notwithstanding anything to the
contrary contained above, (x) a Foreign Subsidiary which is not a Wholly-Owned
Subsidiary of the U.S. Borrower shall not be required to become a party to a
Guaranty or Security Document, in each case as otherwise contemplated above,
(y) any German Leasing Subsidiary established after the Initial Borrowing Date
shall not be required to become party to a Guaranty or Security Document, in
each case as otherwise
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contemplated above, and (z) any Wholly-Owned Foreign Subsidiary may, if the
preceding provisions of this Section 8.12 are applicable to it, be designated as
constituting a Specified Non-Material Subsidiary to the same extent as a
Wholly-Owned Domestic Subsidiary may be so designated (in which case the
respective Specified Non-Material Subsidiary would not be required to become a
party to the Credit Documents otherwise contemplated above in this Section 8.12
except to the extent required by Section 8.14).
8.13 Permitted Acquisitions. Subject to the provisions of this
Section 8.13, Section 9.02(ii) and the requirements contained in the definition
of Permitted Acquisition (and, if applicable, Two-Step Permitted Acquisition),
the U.S. Borrower and its Wholly-Owned Subsidiaries may from time to time after
the Initial Borrowing Date effect Permitted Acquisitions, so long as (i) the
U.S. Borrower shall have given the Administrative Agent and the Lenders at least
10 Business Days' prior written notice of any Permitted Acquisition, (ii) based
on calculations made by the U.S. Borrower on a Pro Forma Basis after giving
effect to the respective Permitted Acquisition and any Indebtedness (including,
without limitation, Acquired Indebtedness and any Revolving Loans) incurred,
issued or assumed in connection with the respective Permitted Acquisition or to
finance same, no Default or Event of Default will exist under, or would have
existed during the periods covered by, the financial covenants contained in
Sections 9.08 through 9.11, inclusive, of this Agreement; provided that if the
respective Permitted Acquisition is a Two-Step Permitted Acquisition, the
calculations required pursuant to this clause (ii) and following clause (iii)
shall be required to be made on a Pro Forma Basis as otherwise required above or
below, as the case may be, both after giving effect to (x) first, the
acquisition of shares of the Target actually acquired pursuant to the First Step
of the respective Two-Step Permitted Acquisition (but not giving effect to any
subsequent merger or compulsory share acquisition to be effected as part of the
Two-Step Permitted Acquisition) and (y) second, to the actions described in
preceding clause (x) and the subsequent merger or compulsory share acquisition
which will conclude the respective Two-Step Permitted Acquisition, and both sets
of calculations shall show that the financial covenants referenced above or
below, as the case may be, would have been (or are projected to be) complied
with in both scenarios described in preceding clauses (x) and (y) of this
proviso (i.e., whether or not the subsequent merger or compulsory share
acquisition is ever effected), (iii) based on good faith projections prepared by
the U.S. Borrower for the period from the date of the consummation of the
Permitted Acquisition to the date which is one year thereafter, the level of
financial performance measured by the covenants set forth in Sections 9.08
through 9.11 inclusive shall be better than or equal to such level as would be
required to provide that no Default or Event of Default would exist under the
financial covenants contained in Sections 9.08 through 9.11, inclusive, of this
Agreement as compliance with such covenants would be required through the date
which is one year from the date of the consummation of the respective Permitted
Acquisition; provided that if the respective Permitted Acquisition is a Two-Step
Permitted Acquisition, the calculations required pursuant to this clause (iii)
shall be subject to the requirements contained in the proviso to preceding
clause (ii), (iv) the U.S. Borrower shall
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certify that the proposed Permitted Acquisition could not reasonably be expected
to result in increased tax (excluding income and similar tax liabilities as a
result of increased earnings which may result from the respective Permitted
Acquisition), ERISA or environmental liabilities with respect to the U.S.
Borrower or any of its Subsidiaries, in each case that could reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect, it being understood that any determination of whether the proposed
Permitted Acquisition could reasonably be expected to result in such a Material
Adverse Effect shall take into account, inter alia, (x) any available
indemnities and (y) the timing and likelihood of payment thereunder and (v) the
U.S. Borrower shall have delivered to the Administrative Agent an officer's
certificate executed by an Authorized Representative of the U.S. Borrower,
certifying (A) to the best of his knowledge, compliance with the requirements of
preceding clauses (i), (ii) and (iii) and containing the calculations required
by the preceding clauses (ii) and (iii) and (B) compliance with the requirements
of Section 9.02(ii).
8.14 Actions With Respect to Certain Subsidiaries. (a) Within 150
days after the Initial Borrowing Date, the U.S. Borrower shall cause all
Specified Inactive Subsidiaries to be dissolved or liquidated. If any Specified
Inactive Subsidiary is, for any reason, not so dissolved or liquidated within
150 days after the Initial Borrowing Date, then on or prior to such date the
U.S. Borrower shall have caused such Subsidiary to execute and deliver
counterparts of the U.S. Subsidiaries Guaranty, the U.S. Pledge Agreement and
the U.S. Security Agreement, and shall have caused all actions to be taken in
connection therewith as would have been taken if the respective Subsidiary were
a Credit Party on the Initial Borrowing Date.
(b) If at any time any Domestic Subsidiary of the U.S. Borrower
which was not theretofore a Wholly-Owned Subsidiary becomes a Wholly-Owned
Subsidiary of the U.S. Borrower, or any Wholly-Owned Domestic Subsidiary is
created, established or acquired, then on such date, unless at such time the
respective such Subsidiary is designated as a Specified Non-Material Subsidiary
in accordance with the definition thereof (and so long as such Subsidiary meets
the requirements of such definition), such Subsidiary shall be required to
execute and deliver counterparts of the U.S. Subsidiaries Guaranty, the U.S.
Pledge Agreement and the U.S. Security Agreement, and take all action in
connection therewith as would otherwise have been required to be taken pursuant
to Section 5 if such Subsidiary were a Credit Party on the Initial Borrowing
Date.
(c) If at any time any Domestic Subsidiary which was theretofore
a Specified Non-Material Subsidiary ceases to qualify as such in accordance with
the definition thereof, such Subsidiary shall on such date be required to
execute and deliver counterparts of the U.S. Subsidiaries Guaranty, the U.S.
Pledge Agreement and the U.S. Security Agreement, and take all action in
connection therewith as would otherwise have been required to be taken pursuant
to Section 5 if such Subsidiary had been a Credit Party
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on the Initial Borrowing Date. Furthermore, if the aggregate assets of all
Specified Non-Material Subsidiaries exceed the threshold provided in the
definition of Specified Non-Material Subsidiaries contained herein, then one or
more Subsidiaries which were theretofore designated as Specified Non-Material
Subsidiaries shall cease to constitute same (as designated by the U.S. Borrower
or the Administrative Agent in accordance with the definition of Specified
Non-Material Subsidiaries contained herein), and each such Subsidiary, as well
as any other Subsidiary which the U.S. Borrower at any time notifies the
Administrative Agent in writing shall no longer constitute a Specified
Non-Material Subsidiary, shall take all actions specified in the immediately
preceding sentence.
(d) In addition to the foregoing requirements, if at any time any
Subsidiary of the U.S. Borrower executes and delivers any guaranty in respect of
the New Senior Subordinated Notes, such Subsidiary shall automatically and
without any further action cease to constitute a Specified Non-Material
Subsidiary (if same was theretofore designated as a Specified Non-Material
Subsidiary) and, in any event, the respective Subsidiary shall on such date be
required to execute and deliver counterparts of the U.S. Subsidiaries Guaranty,
the U.S. Pledge Agreement and the U.S. Security Agreement, and take all action
in connection therewith as would otherwise have been required to be taken
pursuant to Section 5 if such Subsidiary were a Credit Party on the Initial
Borrowing Date.
(e) If at any time the U.S. Borrower or any of its Subsidiaries
creates, establishes or acquires any new German Subsidiaries (excluding any
German Leasing Subsidiary), then on the date of the creation, establishment or
acquisition thereof, such Subsidiary shall be required, unless it is designated
as a Specified Non-Material Subsidiary in accordance with the definition thereof
contained herein, to execute and deliver such Credit Documents as the respective
such Subsidiary would have had to execute and deliver on the Initial Borrowing
Date had such German Subsidiary existed on such date.
(f) Each Subsidiary required to take actions pursuant to
preceding Section 8.14(a) through (e), inclusive, shall execute and deliver, or
cause to be executed and delivered, all other relevant documentation of the type
described in Section 5 (including without limitation opinions of counsel) as
such Subsidiary would have had to deliver if such new Subsidiary were a Credit
Party on the Initial Borrowing Date, with all actions to be taken pursuant to
this Section 8.14 to be taken to the reasonable satisfaction of the
Administrative Agent and the Collateral Agent.
8.15 Margin Stock. The U.S. Borrower will, and will cause each of
its Subsidiaries to, take any and all actions as may be required to ensure that
no Margin Stock (other than Margin Stock owned on the Initial Borrowing Date the
fair market value of which does not exceed the amount referenced in Section
7.27) is at any time owned by the U.S. Borrower and its Subsidiaries, except
that (i) after the Initial Borrowing Date, the U.S. Borrower and its
Subsidiaries may acquire and own (so long as the respective
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acquisition is permitted by the other covenants contained in this Agreement,
including without limitation Section 9.05) Margin Stock so long as the fair
market value thereof at no time, when aggregated with the fair market value of
any Margin Stock owned on the Initial Borrowing Date as referenced in Section
7.27 which continues to be owned by the U.S. Borrower and/or its Subsidiaries at
such time, exceeds $7,500,000 (except as a result of appreciation in such fair
market value after the acquisition of such Margin Stock by the U.S. Borrower or
its respective Subsidiary) and (ii) in addition to Margin Stock at any time held
pursuant to preceding clause (i), Margin Stock may be acquired in connection
with a Two-Step Permitted Acquisition where the consummation of the First Step
thereof results in the acquisition of Margin Stock. Notwithstanding anything to
the contrary contained above, at the time the U.S. Borrower or any of its
Subsidiaries acquires any Margin Stock, and if at such time the aggregate fair
market value of all Margin Stock owned by the U.S. Borrower and its Subsidiaries
exceeds (or would exceed) $100,000, the U.S. Borrower shall immediately notify
the Administrative Agent of such acquisition (providing in reasonable detail a
description of the Margin Stock and the fair market value thereof) and, to the
extent required by the terms of the various Security Documents, the Margin Stock
so acquired shall be pledged thereunder. In addition, at any time when, and upon
the occurrence of each Credit Event during any period when, Obligations
hereunder are secured by Margin Stock, (i) the Borrower will, and will cause its
Subsidiaries to, take any and all actions as may be required, or as may be
reasonably requested by the Administrative Agent, to establish compliance with
Regulations G and U, (ii) the U.S. Borrower shall deliver to each Lender a duly
completed Form U-1 or G-3, as appropriate, referred to in Regulations U and G
and (iii) each Lender shall be able in good faith to complete said Form U-1 or
G-3, as the case may be, showing that the Loans and other extensions of credit
by the Lenders pursuant to this Agreement comply with Regulations U and G,
including with respect to the collateral valuation requirements thereof.
Furthermore, as promptly as practicable after the consummation of any Two-Step
Permitted Acquisition and in any event within 30 days thereafter, the U.S.
Borrower will, and will cause its Subsidiaries to, take any and all actions as
may be required to ensure that no capital stock acquired pursuant to such
Two-Step Permitted Acquisition shall continue to, or at any time thereafter,
constitute Margin Stock.
8.16 Existing Senior Secured Notes Collateral. From time to time
as requested by the Administrative Agent, the U.S. Borrower shall, so long as
any Existing Senior Secured Notes remain outstanding, furnish to the
Administrative Agent an updated Schedule XIII, which shall list all collateral,
as of the date such updated schedule is prepared, held by the trustee under the
Existing Senior Secured Notes Indenture, or any other agent, sub-agent,
collateral agent or other custodian for the benefit of the holders of the
Existing Senior Secured Notes, which schedule shall list the respective
collateral and identify the person or persons which have custody of same. The
U.S. Borrower shall take all actions so that, at all times after the Initial
Borrowing Date, each Person holding collateral for the benefit of the holders of
the Existing Senior Secured Notes, whether in its capacity as trustee, agent,
sub-agent, collateral agent or other custodian, shall have
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executed and delivered to the Administrative Agent a copy of the Bailee
Agreement (or an agreement in substantially similar form which is acceptable to
the Administrative Agent). The U.S. Borrower shall notify the Administrative
Agent before any such additional trustee, agent, sub-agent, collateral agent or
other custodian is so appointed. It is understood and agreed that the foregoing
covenant shall not apply to any cash or government securities deposited in
defeasance of any Existing Senior Secured Notes which remain outstanding after
the Initial Borrowing Date.
8.17 Covenant Defeasance of Existing Senior Secured Notes. The
U.S. Borrower shall take all action as is required so that, within 180 days of
the Initial Borrowing Date, (x) any Existing Senior Secured Notes which remain
outstanding at such time are defeased pursuant to a covenant defeasance meeting
the requirements of the Existing Senior Secured Notes Indenture and (y) all
collateral (other than cash and U.S. government securities deposited to effect
such defeasance) held by the trustee under the Existing Senior Secured Notes
Indenture, or any other agent, sub-agent, collateral agent or other custodian
for the benefit of the holders of Existing Senior Secured Notes, is released
from the security interests created pursuant to the Existing Senior Secured
Notes Collateral Documents and is, as contemplated by the Bailee Agreement,
delivered to (or as directed by) the Collateral Agent to be held by it (or a
sub-agent designated by the Collateral Agent) pursuant to the terms of the
Security Documents; provided that any such collateral so released at the time of
a covenant defeasance with respect to the Existing Senior Secured Notes as
contemplated above which is not permitted to be granted as security pursuant to
the Security Agreements under Applicable Gaming Regulations as contemplated by
the provisions of Section 13 hereof, shall (to the extent such collateral is not
permitted to be held in pledge at such time) be delivered to the U.S. Borrower.
SECTION 9. Negative Covenants. Each of the Borrowers hereby
covenant and agree that subject to receipt of the Subsidiary Stock Restrictions
Requisite Approvals, on and after the Effective Date and until the Total
Commitments and all Letters of Credit have terminated and the Loans, Notes and
Unpaid Drawings, together with interest, Fees and all other Obligations (other
than contingent indemnification obligations) incurred hereunder and thereunder,
are paid in full:
9.01 Liens. Such Borrower will not, and will not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or
with respect to any property or assets (real or personal, tangible or
intangible) of such Borrower or any of its Subsidiaries, whether now owned or
hereafter acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such property
or assets (including sales of accounts receivable with recourse to such Borrower
or any of its Subsidiaries), or assign any right to receive income or permit the
filing of any financing statement under the UCC or any other similar notice of
Lien under any similar recording or notice statute; provided that the provisions
of this Section 9.01 shall not prevent the creation, incurrence, assumption or
existence of the following (Liens
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described below are herein referred to as "Permitted Liens"):
(i) inchoate Liens for taxes, assessments or governmental
charges or levies not yet due and payable or Liens for taxes,
assessments or governmental charges or levies being contested in good
faith and by appropriate proceedings for which adequate reserves have
been established in accordance with generally accepted accounting
principles;
(ii) Liens in respect of property or assets of the U.S. Borrower
or any of its Subsidiaries imposed by law, which were incurred in the
ordinary course of business and do not secure Indebtedness for borrowed
money, such as carriers', warehousemen's, materialmen's and mechanics'
liens and other similar Liens arising in the ordinary course of
business, and (x) which do not in the aggregate materially detract from
the value of the property and assets of the U.S. Borrower and its
Subsidiaries taken as a whole or materially impair the use thereof in
the operation of the business of the U.S. Borrower or such Subsidiary or
(y) which are being contested in good faith by appropriate proceedings,
which proceedings have the effect of preventing the forfeiture or sale
of the property or assets subject to any such Lien;
(iii) Liens in existence on the Initial Borrowing Date (but not
securing the Existing Senior Secured Notes) which are listed, and the
property subject thereto described, in Schedule VII, but only to the
respective date, if any, set forth in such Schedule VII for the removal,
replacement and termination of any such Liens, plus renewals,
replacements and extensions of such Liens to the extent set forth on
Schedule VII, provided that (x) the aggregate principal amount of the
Indebtedness, if any, secured by such Liens does not increase from that
amount outstanding at the time of any such renewal, replacement or
extension and (y) any such renewal, replacement or extension does not
encumber any additional assets or properties of the U.S. Borrower or any
of its Subsidiaries;
(iv) Permitted Encumbrances;
(v) Liens created pursuant to the Security Documents;
(vi) licenses, leases, sublicenses or subleases granted to other
Persons not materially interfering with the conduct of the business of
the U.S. Borrower and its Subsidiaries taken as a whole;
(vii) Liens upon assets of the U.S. Borrower or its Subsidiaries
subject to Capitalized Lease Obligations to the extent such Capitalized
Lease Obligations are permitted by Section 9.04(iv), provided that
(x) such Liens only serve to secure the payment of Indebtedness arising
under such Capitalized Lease Obliga-
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tion and (y) the Lien encumbering the asset giving rise to the
Capitalized Lease Obligation does not encumber any other asset of the
U.S. Borrower or any Subsidiary of the U.S. Borrower;
(viii) Liens placed upon equipment or machinery used in the
ordinary course of business of the U.S. Borrower or any of its
Subsidiaries at the time of acquisition thereof by the U.S. Borrower or
any such Subsidiary or within 90 days thereafter to secure Indebtedness
incurred to pay all or a portion of the purchase price thereof or to
secure Indebtedness incurred solely for the purpose of financing the
acquisition of any such equipment or machinery or extensions, renewals
or replacements of any of the foregoing for the same or a lesser amount,
provided that (x) the aggregate outstanding principal amount of all
Indebtedness secured by Liens permitted by this clause (viii) shall not
at any time exceed $1,000,000 and (y) in all events, the Lien
encumbering the equipment or machinery so acquired does not encumber any
other asset of the U.S. Borrower or such Subsidiary;
(ix) easements, rights-of-way, restrictions, encroachments and
other similar charges or encumbrances, and minor title deficiencies, in
each case not securing Indebtedness and not materially interfering with
the conduct of the business of the U.S. Borrower or any of its
Subsidiaries;
(x) Liens arising from precautionary UCC financing statement
filings regarding operating leases entered into by the U.S. Borrower or
any of its Subsidiaries in the ordinary course of business;
(xi) Liens arising out of the existence of judgments, decrees or
awards not constituting an Event of Default under Section 10.09,
provided that no cash or property is deposited or delivered to secure
the respective judgment or award (or any appeal bond in respect thereof,
except as permitted by following clause (xiii));
(xii) statutory and common law landlords' liens under leases to
which the U.S. Borrower or any of its Subsidiaries is a party;
(xiii) Liens (other than any Lien imposed by ERISA) (x) incurred or
deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security or (y) to secure the performance of tenders, statutory
obligations (other than excise taxes), surety, stay, customs and appeal
bonds, statutory bonds, bids, leases, government contracts, trade
contracts, performance and return of money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money)
and (z) deposits made in the ordinary course of business to secure
liability for premiums to insurance carriers, provided that the
aggregate amount of deposits at any time pursuant to clauses (y) and (z)
shall not exceed $15,000,000 in the
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aggregate;
(xiv) Liens securing Acquired Indebtedness incurred in accordance
with Section 9.04(ix) and, to the extent provided therein, (xiii)
provided that (A) such Liens secured such Acquired Indebtedness at the
time of and prior to the incurrence of such Acquired Indebtedness by the
U.S. Borrower or a Subsidiary of the U.S. Borrower and were not granted
in connection with, or in anticipation of, the incurrence of such
Acquired Indebtedness by the U.S. Borrower or a Subsidiary of the U.S.
Borrower and (B) such Liens do not extend to or cover any property or
assets of the U.S. Borrower or of any of its Subsidiaries other than the
property or assets that secured the Acquired Indebtedness prior to the
time such indebtedness became Acquired Indebtedness of the U.S. Borrower
or a Subsidiary of the U.S. Borrower and are no more favorable to the
lienholders than those securing the Acquired Indebtedness prior to the
incurrence of such Acquired Indebtedness by the U.S. Borrower or a
Subsidiary of the U.S.Borrower;
(xv) (a) until the 180th day after the Initial Borrowing Date (or
any earlier date upon which the covenant defeasance with respect to the
Existing Senior Secured Notes is effected as required by Section 8.17),
Liens on capital stock of Subsidiaries of the U.S. Borrower which
secured the Existing Senior Secured Notes prior to the Initial Borrowing
Date and Liens on any proceeds thereof, in each case pursuant to the
requirements of the Existing Senior Secured Note Documents, and so long
as the Collateral Agent, on behalf of the Secured Creditors, maintains a
second priority perfected security interest therein as contemplated by
the Bailee Agreement and the U.S. Pledge Agreement, and (b) at any time
after the covenant defeasance of the Existing Senior Secured Notes has
been effected as required by Section 8.17, Liens created on Cash
Equivalents or Investments made as described in Section 9.05 (xix)(b)
which have been deposited in order to effect the covenant defeasance of
the Existing Senior Secured Notes;
(xvi) Liens may be created on Cash Equivalents or Investments made
as described in Section 9.05(xix)(a) securing liabilities for jackpots
payable for progressive games in a manner consistent with industry
practice and applicable Gaming Regulations;
(xvii) any German Leasing Subsidiary may create Liens on its assets
to secure its outstanding Non-Recourse German Leasing Subsidiary Debt,
so long as the respective Non-Recourse German Leasing Subsidiary Debt is
permitted pursuant to Section 9.04(xiv); and
(xviii) additional Liens, so long as neither the fair market value
of all assets subject thereto, nor the aggregate amount of obligations
secured thereby, exceeds $1,000,000 in the aggregate at any time
outstanding.
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9.02 Consolidation, Merger, Purchase or Sale of Assets, etc.
Subject to receipt of Subsidiary Stock Restrictions Requisite Gaming approvals,
the U.S. Borrower will not, and will not permit any of its Subsidiaries to, wind
up, liquidate or dissolve its affairs or enter into any transaction of merger or
consolidation, or convey, sell, lease or otherwise dispose of (or agree to do
any of the foregoing at any future time) all or any part of its property or
assets, or enter into any sale-leaseback transactions, or purchase or otherwise
acquire (in one or a series of related transactions) any part of the property or
assets (other than purchases or other acquisitions of inventory, materials and
equipment in the ordinary course of business) of any Person, except that:
(i) Capital Expenditures by the U.S. Borrower and its
Subsidiaries shall be permitted to the extent not in violation of
Section 9.07;
(ii) the U.S. Borrower and its Wholly-Owned Subsidiaries shall be
permitted to make Permitted Acquisitions so long as (A) such Permitted
Acquisitions are effected in accordance with the requirements of Section
8.13, (B) after giving effect to any Permitted Acquisition effected
after the Effective Date, the aggregate amount paid (including for the
purpose of this clause (ii) all cash consideration, the fair market
value of all non-cash consideration and the aggregate principal amount
of all Acquired Indebtedness issued, incurred or assumed in connection
with Permitted Acquisitions effected after the Effective Date, but
excluding any U.S. Borrower Common Stock directly issued as
consideration in connection with Permitted Acquisitions) by the U.S.
Borrower and its Subsidiaries in connection with all Permitted
Acquisitions effected after the Effective Date shall not exceed $30
million, except to the extent the Cumulative Net Income Amount (as in
effect on the date the respective Permitted Acquisition is consummated)
is used to pay (or justify the payment of) consideration in connection
with one or more Permitted Acquisitions, and (C) with respect to each
Permitted Acquisition, no Default or Event of Default is in existence at
the time of the consummation of such Permitted Acquisition or would
exist after giving effect thereto;
(iii) Investments may be made to the extent permitted by Section
9.05;
(iv) the U.S. Borrower and its Subsidiaries may lease (as lessee)
real or personal property in the ordinary course of business (so long as
any such lease does not create a Capitalized Lease Obligation except to
the extent permitted by Section 9.04);
(v) the U.S. Borrower and its Subsidiaries may sell and lease
(but not pursuant to Sale and Leaseback Transactions or to any German
Leasing Subsidiary or German Leasing Joint Venture) inventory
(including, without limitation, gaming equipment) in the ordinary course
of business;
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(vi) the U.S. Borrower and its Subsidiaries may sell used and
obsolete gaming equipment in the ordinary course of business; provided
that at least 85% of the consideration therefor shall constitute cash
(for this purpose, treating the amount of credit for trade-ins on new
gaming equipment as cash receipts);
(vii) so long as no Default or Event of Default then exists or
would exist immediately after giving effect thereto, the U.S. Borrower
and its Subsidiaries may sell equipment and other assets, to the extent
not otherwise permitted under any other clause of this Section 9.02, at
the fair market value thereof (as determined in good faith by management
of the U.S. Borrower), provided that (x) of the total consideration
received therefor (taking the amount of cash and the fair market value
of any non-cash consideration), at least 85% of such consideration shall
be in cash and (y) the aggregate consideration (valued as described
above) for all sales pursuant to this clause (vii) shall not exceed (1)
$10,000,000 in any fiscal year of the U.S. Borrower or (2) $50,000,000
in the aggregate;
(viii) the U.S. Borrower and its Subsidiaries may, in the ordinary
course of business, license, as licensor or licensee, patents,
trademarks, copyrights and know-how to third Persons and to one another;
(ix) so long as no Default or Event of Default then exists or
would exist immediately after giving effect thereto, the sale or initial
public offering of up to 20% of the capital stock or other equity
interests in the German Parent, or any other Wholly-Owned Foreign
Subsidiary into which the U.S. Borrower consolidates or transfers its
German operations in advance of such offering of capital stock or equity
interests, shall be permitted, provided that (x) such sale or initial
public offering does not impair the ability of the German Parent (or
other entity described above) and its Subsidiaries to repatriate cash
freely to the U.S. Borrower in a percentage at least equal to the U.S.
Borrower's direct and indirect equity interests therein, (y) 100% of the
net after tax proceeds of such sale or initial public offering shall
remain with the U.S. Borrower and/or its Subsidiaries and (z) 50% of
such proceeds of such sale or initial public offering shall be required
to be applied as a mandatory prepayment and/or commitment reduction
pursuant to Section 4.02(c);
(x) the U.S. Borrower and its Subsidiaries may, subject to
compliance with Section 9.06, transfer inventory (including, without
limitation, gaming equipment) to each other in the ordinary course of
business, provided that transfers of inventory to one or more German
Leasing Subsidiaries shall not be permitted pursuant to this clause (x);
(xi) the U.S. Borrower and its Subsidiaries may enter into
agreements
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to effect acquisitions and dispositions of stock or assets so long as
the respective transaction is permitted pursuant to the provisions of
this Section 9.02; provided that the U.S. Borrower and its Subsidiaries
may enter into agreements to effect acquisitions and dispositions of
capital stock or assets in transactions not permitted by the provisions
of this Section 9.02 at the time the respective agreement is entered
into, so long as in the case of each such agreement, such agreement
shall be expressly conditioned upon obtaining the requisite consent of
the Required Lenders under this Agreement as a condition precedent to
the consummation of their respective transaction and, if for any reason
the transaction is not consummated because of the failure to obtain
such consent, the aggregate liability of the U.S. Borrower and its
Subsidiaries under any such agreement shall not exceed $1,000,000;
(xii) the German Parent and its Subsidiaries may sell and/or
otherwise transfer German lease receivables, gaming equipment leased in
Germany or gaming equipment to be leased in Germany, to one or more
German Leasing Subsidiaries and/or German Leasing Joint Ventures, in
each case so long as the aggregate fair market value of all assets so
transferred pursuant to this clause (xii) in any fiscal year of the U.S.
Borrower does not exceed $12,500,000 and so long as the German Parent
and its Subsidiaries (excluding German Leasing Subsidiaries) receive in
return (at the time of transfer or within one Business Day thereafter)
cash equal to at least 70% of the fair market value (as determined in
good faith by the U.S. Borrower) of the assets so transferred;
(xiii) liquidations and dissolutions of Subsidiaries expressly
contemplated by Sections 8.04 and 8.14 shall be permitted; and
(xiv)(a) the German Borrowers may transfer assets to each other,
(b) any Wholly-Owned Subsidiary Guarantor of the U.S. Borrower may merge
into the U.S. Borrower (so long as the U.S. Borrower is the surviving
corporation thereof) or with or into any other Wholly-Owned Subsidiary
Guarantor and (c) the U.S. Borrower and one or more Wholly-Owned
Subsidiary Guarantors may sell or transfer assets to each other, in each
case so long as the action or actions taken pursuant to this clause
(xiv) does not, or do not, adversely affect the Lenders or the security
interests in assets or guarantees given in respect of the Obligations
hereunder.
To the extent the Required Lenders waive the provisions of this Section 9.02
with respect to the sale of any Collateral, or any Collateral is sold as
permitted by this Section 9.02, in each case so long as the respective sale is
to a Person other than a Borrower or any of its Subsidiaries (other than a
German Leasing Subsidiary in a case of transfers pursuant to clause (xii)
above), such Collateral shall be sold free and clear of the Liens created by the
Security Documents, and the Administrative Agent and the Collateral Agent shall
be
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authorized to take any actions deemed appropriate in order to effect the
foregoing. Notwithstanding anything to the contrary contained above in this
Section 9.02, except as expressly permitted pursuant to Section 9.02(ix), no
capital stock of, or equity interests in, any Subsidiary shall be sold,
transferred or otherwise disposed of pursuant to this Section 9.02 to any Person
which is not the U.S. Borrower or a Wholly-Owned Subsidiary thereof, in each
case unless 100% of the equity interest of the U.S. Borrower and its
Subsidiaries in the respective such Subsidiary (and any Subsidiary of the
respective such Subsidiary) are sold pursuant to a sale effected in accordance
with the applicable requirements of this Section 9.02. If 100% of the equity
interests of any Subsidiary are sold to Persons other than the U.S. Borrower and
its Subsidiaries in a transaction effected in accordance with the requirements
of this Section 9.02, then the respective Person wherein the equity the
interests were so sold and each of its Subsidiaries shall be released from its
obligations pursuant to any Subsidiary Guaranty to which it was a party and all
other Credit Documents to which it was a party, in each case so long as the
respective Subsidiary is also released from all guarantees theretofore executed
and delivered by and in respect of the New Senior Subordinated Notes.
9.03 Restricted Payments. The U.S. Borrower will not, and will not
permit any of its Subsidiaries to, authorize, declare, pay or make any
Restricted Payments, except that (i) any Subsidiary of the U.S. Borrower (x) may
make Restricted Payments to the U.S. Borrower or any Wholly-Owned Subsidiary of
the U.S. Borrower and (y) if such Subsidiary is not a Wholly-Owned Subsidiary,
may pay cash dividends to their minority shareholders (not to exceed their
proportionate share thereof as determined in accordance with the relevant
documentation relating to the minority interests) upon a payment of dividends by
the respective such non-Wholly-Owned Subsidiary to the U.S. Borrower and its
Subsidiaries; (ii) so long as (x) no Default or Event of Default is in existence
(or will exist after given effect to the respective Restricted Payment) and (y)
the Leverage Ratio is no greater than 3.50:1.00 as tested on the last day of the
Test Period last ended (and would remain so after the respective Restricted
Payment), the U.S. Borrower and its Subsidiaries may make Restricted Payments so
long as the amount thereof would not exceed the Cumulative Net Income Amount as
in effect immediately before the making of the respective Restricted Payment (it
being understood and agreed that, if any dividend is declared by the U.S.
Borrower pursuant to this clause (ii) at a time when the foregoing requirements
are met (and would be met if the respective dividend were paid on such date),
such dividend may be made within sixty days after the date of such declaration;
provided that in the event of any such declaration the amount so declared shall
be deemed a usage of the Cumulative Consolidated Net Income Amount on the date
of the respective declaration); (iii) so long as there exists no Default or
Event of Default (both before and after giving effect to the payment thereof),
the U.S. Borrower may repurchase outstanding shares of its common stock (or
options to purchase such common stock) following the death, disability or
termination of employment of employees of the U.S. Borrower or any of its
Subsidiaries, provided that the aggregate amount of Restricted Payments made by
the U.S. Borrower pursuant to this clause (iii) shall not exceed
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$300,000 in any fiscal year of the U.S. Borrower; (iv) the U.S. Borrower may,
within 45 days after the Initial Borrowing Date, redeem its outstanding Existing
PIK Preferred Stock in connection with the Refinancing (and, prior to the
redemption of the Existing PIK Preferred Stock as required by this Agreement,
the U.S. Borrower may make open market or negotiated purchases of any
outstanding Existing PIK Preferred Stock so long as the U.S. Borrower does not
pay consideration therefor which exceeds the amount which would have been
payable in connection with the redemption of same and so long as any Existing
PIK Preferred Stock so repurchased is retired); (v) the U.S. Borrower may
repurchase the Existing Senior Secured Notes pursuant to the Existing Senior
Secured Notes Tender Offer/Consent Solicitation; (vi) so long as not more than
$12.5 million aggregate principal amount of Existing Senior Secured Notes remain
outstanding following the consummation of the Existing Senior Secured Notes
Tender Offer/Consent Solicitation, same may be repurchased (and cancelled) or
redeemed at any time when no Default or Event of Default is in existence (or
would exist immediately after giving effect thereto), provided that the
aggregate amounts spent pursuant to preceding clause (vi) shall not exceed $12.5
million; (vii) the U.S. Borrower may repay any then outstanding Existing Senior
Secured Notes at maturity in accordance with the terms thereof; and (viii) Bally
Gaming International, Inc. may pay up to $2,350,000 in respect of the settlement
of options outstanding on the Initial Borrowing Date under previously adopted
employee benefit plans.
9.04 Indebtedness. The U.S. Borrower will not, and will not
permit any of its Subsidiaries to, contract, create, incur, assume or suffer to
exist any Indebtedness, except:
(i) Indebtedness incurred pursuant to this Agreement and the
other Credit Documents;
(ii) Indebtedness with respect to performance bonds, surety
bonds, appeal bonds or customs bonds required in the ordinary course of
business or in connection with the enforcement of rights or claims of
the U.S. Borrower or any of its Subsidiaries or in connection with
judgments that do not result in a Default or an Event of Default,
provided that the aggregate outstanding amount of all such performance
bonds, surety bonds, appeal bonds and customs bonds permitted by this
clause (ii) shall not at any time exceed $15,000,000;
(iii) Indebtedness under Interest Rate Protection Agreements which
are non-speculative in nature and are entered into to protect the U.S.
Borrower and/or its Subsidiaries against fluctuations in interest rates
in respect of floating rate Indebtedness outstanding at the time of the
respective Interest Rate Protection Agreements are entered into (or
expected to be outstanding within 30 days thereafter), which floating
rate Indebtedness is otherwise permitted to remain outstanding or be
incurred, as the case may be, pursuant to this Section 9.04;
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(iv) Indebtedness evidenced by Capitalized Lease Obligations
entered into in connection with Capital Expenditures permitted pursuant
to Section 9.07, provided that in no event shall the aggregate principal
amount of Capitalized Lease Obligations permitted by this clause (iv)
exceed $3,000,000 at any time outstanding;
(v) Indebtedness subject to Liens permitted under Section
9.01(viii);
(vi) Existing Indebtedness outstanding on the Initial Borrowing
Date and listed on Schedule V, without giving effect to any subsequent
extension, renewal or refinancing thereof, except that with respect to
the Existing Indebtedness specifically identified on Schedule V as being
permitted to be refinanced, such Existing Indebtedness may be extended,
renewed or refinanced (and successively extended, renewed or refinanced)
so long as (x) the principal amount thereof is not increased, (y) no
additional security is furnished in connection therewith and (z) the
obligor remains the same and no additional guaranties are furnished in
connection therewith;
(vii) Indebtedness constituting intercompany loans and advances to
the extent permitted by Section 9.05(viii);
(viii) Indebtedness under Other Hedging Agreements providing
protection against fluctuations in currency values in connection with
the U.S. Borrower's or any of its Subsidiaries' operations so long as
management of the U.S. Borrower's or such Subsidiary, as the case may
be, has determined that the entering into of such Other Hedging
Agreements are bona fide hedging activities and are not speculative in
nature;
(ix) Acquired Indebtedness may be incurred or assumed in
connection with Permitted Acquisitions, so long as the aggregate
principal amount of all Acquired Indebtedness incurred or assumed after
the Initial Borrowing Date does not exceed $10,000,000;
(x) the New Senior Subordinated Notes shall be permitted to be
issued and remain outstanding (and may be guaranteed, on a subordinated
basis, by any U.S. Subsidiary Guarantor other than RCVP); provided that
the aggregate principal amount thereof at no time outstanding shall
exceed the principal amount thereof originally issued on or prior to the
Initial Borrowing Date less the amount of all repayments thereof made
after the Initial Borrowing Date in accordance with Section 9.03;
(xi) the Existing Senior Secured Notes not purchased pursuant to
the
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Existing Senior Secured Notes Tender Offer/Consent Solicitation shall
be permitted to remain outstanding (and may be guaranteed, to the
extent required in accordance with the Existing Senior Secured Notes
Documents by one or more U.S Subsidiary Guarantors) so long as (A) the
aggregate principal amount thereof at no time outstanding exceeds the
remainder of (x) the aggregate principal amount of such Existing Senior
Secured Notes not tendered pursuant to the Existing Senior Secured
Notes Tender Offer/Consent Solicitation less (y) the aggregate
principal amount thereof repaid after the Initial Borrowing Date
pursuant to Section 9.03 and (B) on and after the 180th day after the
Initial Borrowing Date, the provisions of Section 8.17 have been
complied with;
(xii) Indebtedness incurred by the U.S. Borrower or any of its
Subsidiaries represented by liabilities for jackpots payable for
progressive games in a manner consistent with industry practice and
applicable Gaming Regulations;
(xiii) in addition to Indebtedness otherwise permitted above or
pursuant to clause (xiv) below, the U.S. Borrower and its Subsidiaries
may from time to time issue or incur Indebtedness (of which (x) up to
$5,000,000 may be incurred in connection with Permitted Acquisitions and
(y) no more than $1,000,000 may be secured by Liens pursuant to Section
9.01(viii)) so long as the aggregate principal amount of all
Indebtedness at any time outstanding pursuant to this clause (xiii) does
not exceed $10,000,000; and
(xiv) Non-Recourse German Leasing Debt incurred by one or more
German Leasing Subsidiaries, so long as the aggregate principal amount
of Indebtedness incurred pursuant to this clause (xiv)(a) in no fiscal
year of the U.S. Borrower exceeds $10,000,000 and (b) at no time
outstanding exceeds $40,000,000.
9.05 Advances, Investments and Loans. The U.S. Borrower will not,
and will not permit any of its Subsidiaries to, directly or indirectly, lend
money or credit or make advances to any Person, or purchase or acquire any
stock, obligations or securities of, or any other interest in, or make any
capital contribution to, any other Person, or purchase or own a futures contract
or otherwise become liable for the purchase or sale of currency or other
commodities at a future date in the nature of a futures contract, or hold any
cash or, Cash Equivalents (each of the foregoing an "Investment" and,
collectively, "Investments"), except that the following shall be permitted:
(i) the U.S. Borrower and its Subsidiaries may acquire and hold
accounts receivables, trade receivables, notes receivables, prepaid
expenses and similar items owing to any of them, if created or acquired
in the ordinary course of business and payable or dischargeable in
accordance with customary terms, and the U.S. Borrower and its
Subsidiaries may own Investments received in
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connection with the bankruptcy, work-out, reorganization, liquidation
or similar proceeding of suppliers and customers and in settlement of
delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business;
(ii) the U.S. Borrower and its Subsidiaries may acquire and hold
cash and Cash Equivalents;
(iii) the U.S. Borrower and its Subsidiaries may hold the
Investments held by them on the Initial Borrowing Date and described on
Schedule VIII without giving effect to any additions thereto or
replacements thereof;
(iv) the U.S. Borrower and its Subsidiaries may make loans and
advances in the ordinary course of business to their respective
employees so long as the aggregate principal amount thereof at any time
outstanding (determined without regard to any write-downs or write-offs
of such loans and advances) shall not exceed $1,000,000;
(v) the U.S. Borrower and its Subsidiaries may enter into
Interest Rate Protection Agreements to the extent permitted by Section
9.04(iii);
(vi) the U.S. Borrower and its Subsidiaries may enter into Other
Hedging Agreements to the extent permitted by Section 9.04(viii);
(vii) the U.S. Borrower and its Subsidiaries shall be permitted to
make Capital Expenditures to the extent permitted by Section 9.07;
(viii) after the Initial Borrowing Date, (a) the U.S. Borrower and
the Wholly-Owned Subsidiary Guarantors may make, or permit to remain
outstanding, Investments in each other; provided that if at any time any
Person ceases to be a Wholly-Owned Subsidiary Guarantor no Investments
(excluding equity contributions which are not returned in the case of
the sale of 100% of the equity interests in said Wholly-Owned Subsidiary
to a Person other than the U.S. Borrower and its Subsidiaries in a
transaction effected in compliance with Section 9.02) theretofore made
in such Person shall cease to be permitted pursuant to this clause (a),
(b) Investments may be made by the U.S. Borrower and its Wholly-Owned
Domestic Subsidiaries in other Wholly-Owned Domestic Subsidiaries that
are Specified Non-Material Subsidiaries, provided that if, as a result
of the respective Investment or otherwise, the respective Subsidiary
ceases to qualify as a Specified Non-Material Subsidiary, it shall be
required to take the actions specified in Section 8.14 and, provided
further, if the respective Specified Non-Material Subsidiary ceases to
be a Wholly-Owned Domestic Subsidiary, any Investments theretofore made
therein (other than equity contributions which are not returned in
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the case of the sale of 100% of the equity interests in said Wholly-
Owned Subsidiary to a Person other than the U.S. Borrower and its
Subsidiaries in a transaction effected in compliance with Section 9.02)
shall cease to be permitted pursuant to this clause (b), (c) the German
Borrowers may make unlimited Investments in each other without
limitation, (d) the German Parent may make Investments in the German
Borrowers without limitation, (e) the German Borrowers may make
intercompany loans to any German Subsidiary Guarantor, which
intercompany loans shall be evidenced by an inter-company note which,
in a case of loans to Bally Gaming International GmbH, shall be Bally
Gaming International GmbH Senior Secured Loans secured by the inventory
and receivables of Bally Gaming International GmbH, (f) Subsidiaries of
the German Parent or German Borrowers (excluding German Leasing
Subsidiaries and German Leasing Joint Ventures) may lend and advance
money to the German Parent and/or German Borrowers on an unsecured
basis, (g) Investments may be made in Domestic Subsidiaries which are
not Wholly-Owned Subsidiaries, and may be made in Wholly-Owned Foreign
Subsidiaries, in each case which have provided unlimited guarantees (in
form and substance reasonably satisfactory to the Administrative Agent)
of all Obligations owing pursuant to this Agreement, so long as the
aggregate amount of such Investments at no time outstanding (determined
without regard to any write-downs or write-offs thereof) does not
exceed $10,000,000, and (h) any Subsidiary of the U.S. Borrower may
make intercompany loans to the U.S. Borrower, provided that all such
loans are subordinated to the Obligations of the U.S. Borrower pursuant
to subordination provisions in substantially the form attached hereto
as Exhibit O, provided further that if any loans made pursuant to this
clause (viii) are evidenced by a promissory note, the respective
promissory note shall be pledged to the extent such pledge is required
by the terms of any Security Document;
(ix) the U.S. Borrower and its Subsidiaries may make any
Investments (x) expressly permitted pursuant to Section 9.02(ii) or (y)
consisting of non-cash consideration to the extent permitted in
connection with dispositions pursuant to Section 9.02(vi) and (vii);
(x) the U.S. Borrower may purchase the Rainbow Royalty Payments
and Rainbow Debt with proceeds of Delayed Draw Term Loans, as
contemplated by Section 5B.02 and, at any time after the Rainbow Royalty
Payments and Rainbow Debt have been so purchased, the U.S. Borrower may
make additional Investments in RCVP (a) to repurchase minority
interests, so long as the aggregate amount spent pursuant to this clause
(x) to purchase minority interests does not exceed $4,000,000 and/or (b)
by way of intercompany loans to RCVP, so long as the aggregate principal
amount of such loans at no time outstanding (determined without regard
to any write-downs or write-offs thereof) exceeds $2,500,000;
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(xi) so long as no Default or Event of Default then exists or
would exist immediately after giving effect thereto, the U.S. Borrower
may make Investments in a joint venture with a gaming company identified
in a letter delivered to the Administrative Agent prior to the Initial
Borrowing Date, in an aggregate amount not to exceed $5,000,000;
(xii) so long as no Default or Event of Default then exists or
would exist immediately after giving effect thereto, the U.S. Borrower
may make investments in a Japanese company identified in a letter
delivered to the Administrative Agent prior to the Initial Borrowing
Date, in an aggregate amount not to exceed $5,000,000;
(xiii) so long as no Default or Event of Default then exists or
would exist immediately after giving effect thereto, Investments in
Kansas Gaming Partners, LLC and Kansas Financial Partners, LLC, so long
as the respective entity is a Subsidiary of the U.S. Borrower, shall be
permitted so long as the aggregate amount of Investments made pursuant
to this clause (xiii) does not exceed $3,000,000;
(xiv) so long as no Default or Event of Default then exists or
would exist immediately after giving effect thereto, Investments, so
long as same constitute Subsidiaries of the U.S. Borrower, may be made
in VSI, SVS and VDSI, in each case to repurchase minority equity
interests therein, so long as the aggregate amount of Investments made
pursuant to this clause (xiv) does not exceed $4,000,000;
(xv) so long as no Default or Event of Default then exists or
would exist immediately after giving effect thereto, Investments may be
made through Native American Investments, Inc., in connection with the
development of gaming facilities at the Cuyapaipe Indian Reservation in
San Diego County, California, so long as the aggregate amount of
Investments made pursuant to this clause (xv) does not exceed
$3,000,000;
(xvi) so long as no Default or Event of Default then exists or
would exist immediately after giving effect thereto, additional
Investments may be made at any time so long as the amount thereof, on
the date the respective Investment is made, does not exceed the
Cumulative Net Income Amount as in effect on such date (immediately
before the making of the respective Investment);
(xvii) the U.S. Borrower and its Wholly-Owned Subsidiaries may
establish Subsidiaries to the extent permitted by Section 9.16 (although
any Investments therein must be independently justified pursuant to the
other provisions of this Section 9.05);
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(xviii) the German Parent and its Subsidiaries may make Investments
in one or more German Leasing Subsidiaries or German Leasing Joint
Ventures, in each case resulting from transfers of assets to the
respective German Leasing Subsidiaries and German Leasing Joint Ventures
effected in accordance with the requirements of Section 9.02(xii);
(xix) Investments by the U.S. Borrower or any of its Subsidiaries
in securities issued directly or indirectly and fully guaranteed or
insured by the United States government or any agency or instrumentality
thereof (a) in an amount outstanding at any time equal to the net
present value of the aggregate amount of payments owed to winners of
jackpots from progressive games and having maturities that are
approximately the same as the due dates for future jackpot payments
and/or (b) in such amounts as are needed to, and that are deposited
pursuant to the requirements of the Existing Senior Secured Notes
Indenture in order to, effect a covenant defeasance of the Existing
Senior Secured Notes as required by Section 8.17; and
(xx) so long as no Default or Event of Default then exists or
would exist immediately after giving effect thereto, in addition to the
investments permitted by clauses (i) through (xvii) above, the U.S.
Borrower and its Subsidiaries may make additional Investments to or in
one or more Persons, so long as all such Investments (determined without
regard to any write-downs or write-offs thereof) do not exceed in
aggregate amount $9,500,000 at any time outstanding.
The aggregate amount of an Investment at any time outstanding for purposes of
determinations pursuant to this Section 9.05 shall be deemed to be equal to the
aggregate amount of cash, together with the aggregate fair market value of all
non-cash assets, loaned, advanced, contributed, transferred or otherwise
invested that gives rise to such Investment, together with the maximum amount of
credit extended (including by way of guaranties) in respect of any such
Investment. For purposes of preceding clauses (xi), (xii), (xiii), (xv) and
(xx), the amount invested at any time shall be deemed reduced by the net
reduction in the respect of such Investments resulting from dividends or
distributions on or repurchases or redemptions of such Investments by the Person
in which the Investment was made, proceeds realized upon the sale of such
Investment to an unaffiliated purchaser, reductions in amounts guaranteed and
repayments of loans or advances or other transfers of assets by such Person to
the U.S. Borrower or its Subsidiary thereof that made the respective Investment;
provided, however, that no amount shall be included pursuant to this sentence as
a reduction in Investment to the extent that is already included in Consolidated
Net Income. Notwithstanding anything to the contrary contained above in the
Section 9.05, (x) after the creation thereof, Investments in the Missouri
License Subsidiary shall be limited to amounts determined by the U.S. Borrower
to be reasonably necessary in connection with the conduct of the Gaming Business
of the U.S. Borrower and its
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Subsidiaries in the State of Missouri and (y) if any other special purpose
Subsidiary is created in a manner similar to the Missouri License Subsidiary for
the reasons expressed in the last sentence of Section 8.11(a) or in Section
9.16(c), the Investments in the respective such Subsidiary shall be limited to
those amounts as the U.S. Borrower reasonably determines are necessary in
connection with the conduct of the Gaming Business required to be isolated in
the respective such special purpose Subsidiary.
9.06 Transactions with Affiliates. The U.S. Borrower will not, and
will not permit any of its Subsidiaries to, enter into any transaction
(including the purchase, sale, lease or exchange of property or the rendering of
services) with any Affiliate (each of the foregoing, an "Affiliate Transaction")
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the U.S. Borrower or the relevant Subsidiary than those that would have been
obtained in a comparable transaction by the U.S. Borrower or such Subsidiary
with an unrelated Person and (ii) the U.S. Borrower delivers to the
Administrative Agent (a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in excess of
$1.0 million, a resolution of the board of directors of the U.S. Borrower set
forth in an officer's certificate of the U.S. Borrower certifying that such
Affiliate Transaction complies with clause (i) above and that such Affiliate
Transaction has been approved by a majority of the disinterested members of the
board of directors of the U.S. Borrower and (b) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $10.0 million, an opinion as to the fairness to the
U.S. Borrower of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing; provided that (v) any Exempt Affiliate Transaction, (w) any
compensation or indemnity arrangement with any officer or director of the U.S.
Borrower (pertaining to his or her duties as an officer or director) entered
into in the ordinary course of business, (x) transactions between or among the
U.S. Borrower and/or its Independent Subsidiaries, (y) Restricted Payments that
are permitted by the provisions of Section 9.03 and (z) Investments permitted
pursuant to Section 9.05 in persons which are Independent Subsidiaries or who
otherwise constitute an Affiliate of the U.S. Borrower, but only because of the
Investment or Investments made by the U.S. Borrower and/or its Subsidiaries in
such Person pursuant to Section 9.05, in each case, shall not be deemed
Affiliate Transactions.
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9.07 Capital Expenditures. (a) The U.S. Borrower will not, and will not
permit any of its Subsidiaries to, make any Capital Expenditures, except that
the U.S. Borrower and its Subsidiaries may make Capital Expenditures so long as
the aggregate amount of such Capital Expenditures does not exceed, during any
period of four consecutive fiscal quarters (taken as one accounting period)
ending on the last day of a fiscal quarter described below, the amount set forth
opposite such fiscal quarter below:
<TABLE>
<CAPTION>
Period of Four Consecutive
Fiscal Quarters Ended Closest to Amount
- -------------------------------- ------
<S> <C>
June 30, 1998 $18.5 million
June 30, 1999 $18.5 million
June 30, 2000 $15 million
June 30, 2001 $15 million
each June 30 ended thereafter $16 million
</TABLE>
(b) Notwithstanding anything to the contrary contained in clause
(a) above, to the extent that the amount of Capital Expenditures (excluding
Capital Expenditures made pursuant to following clause (c)) made by the U.S.
Borrower and its Subsidiaries in any period of four consecutive fiscal quarters
set forth in clause (a) above is less than the amount permitted to be made in
such period (without giving effect to any additional amount available as a
result of this clause (b)), the amount of such difference, but not in excess of
50% of the amount originally permitted to be spent in said period pursuant to
said clause (a), may be carried forward and used to make Capital Expenditures in
the immediately succeeding period of four consecutive fiscal quarters of the
U.S. Borrower. Any amount carried forward into a four consecutive- fiscal
quarter period pursuant to this clause (b) shall, if not used to make Capital
Expenditures in such four consecutive-fiscal quarter period, terminate at the
end thereof (and shall not be carried forward to a subsequent period).
(c) In addition to the Capital Expenditures permitted to be made
pursuant to preceding clauses (a) and (b) of this Section 9.07, (i) the U.S.
Borrower and its Subsidiaries may make additional Capital Expenditures with the
amount of (x) insurance proceeds received by the U.S. Borrower or any of its
Subsidiaries from any Recovery Event so long as such proceeds are used to
replace or restore any properties or assets in respect of which such proceeds
were paid within the time periods set forth in Section 4.02(g) and (y) the Net
Sale Proceeds from sales of assets pursuant to Section 9.02(vii) to the extent
such Net Sale Proceeds are permitted to be reinvested pursuant to Section
4.02(e) and are in fact reinvested in accordance with the requirements of said
Section 4.02(e), (ii) Permitted Acquisitions shall be permitted to be made in
accordance with Sections 9.02 and 8.13, (iii) the U.S. Borrower and its
Subsidiaries may make additional Capital Expenditures in connection with the
establishment of new Proprietary Gaming Operations, provided that the aggregate
amount of Capital Expenditures made pursuant to
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this clause (iii) shall not exceed $5,000,000 and (iv) so long as no Default or
Event of Default then exists or would exist immediately after giving effect
thereto, the U.S. Borrower and its Subsidiaries may at any time make additional
Capital Expenditures so long as the amount thereof does not exceed the
Cumulative Net Income Amount as in effect on the date the respective Capital
Expenditure is made (immediately before the making of such Capital Expenditure).
To the extent Capital Expenditures are made as permitted by this clause (c),
same shall not count as Capital Expenditures for purposes of determining
compliance with clause (a) or (b) of this Section 9.07.
9.08 Consolidated Fixed Charge Coverage Ratio. The Borrowers will
not permit the Consolidated Fixed Charge Coverage Ratio for any Test Period
ended on the last day of a fiscal quarter of the U.S. Borrower ended on or after
June 1, 1998, to be less than (x) in the case of any such Test Period ended on
or prior to June 1, 1999, 1.00:1 and (y) in the case of any Test Period ended
after June 1, 1999, 1.05:1.
9.09 Consolidated Interest Coverage Ratio. The Borrowers will not
permit the Consolidated Interest Coverage Ratio for any Test Period ended after
December 1, 1997 and during a period described below to be less than the ratio
set forth opposite such period below:
<TABLE>
<CAPTION>
Test Periods Ending Ratio
- ------------------- -----
<S> <C>
After December 1, 1997 and
on or prior to June 1, 1999 1.75:1
After June 1, 1999 and
on or prior to June 1, 2000 2.00:1
After June 1, 2000 and
on or prior to June 1, 2001 2.25:1
Thereafter 2.75:1
</TABLE>
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9.10 Maximum Leverage Ratio. The Borrowers will not permit the
Leverage Ratio at any time during a period set forth below to be greater than
the ratio set forth opposite such period below:
<TABLE>
<CAPTION>
Period Ratio
- ------ -----
<S> <C>
From and including December 31, 1997
to but excluding June 30, 1999 5.75:1
From and including June 30, 1999
to but excluding June 30, 2000 5.00:1
From and including June 30, 2000
to but excluding June 30, 2001 4.50:1
Thereafter 3.75:1
</TABLE>
9.11 Minimum Consolidated EBITDA. The Borrowers will not permit
Consolidated EBITDA for any Test Period ended during a period described below to
be less than the respective amount set forth opposite such period below:
<TABLE>
<CAPTION>
Period Amount
- ------ ------
<S> <C>
After December 1, 1997
to and including June 1, 1998 $50 million
After June 1, 1998
to and including June 1, 1999 $52 million
After June 1, 1999
to and including June 1, 2000 $58 million
After June 1, 2000
to and including June 1, 2001 $65 million
Thereafter $74 million
</TABLE>
9.12 Limitation on Voluntary Payments and Modifications of
Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain
Other Agreements; etc. The U.S. Borrower will not, and will not permit any of
its Subsidiaries to, (i) amend, modify or change its certificate of
incorporation (including, without limitation, by the filing or modification of
any certificate of designation) or by-laws or any agreement entered into by it,
with respect to its capital stock (including any Shareholders'
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Agreement), or enter into any new agreement with respect to its capital stock
unless such amendment, modification, change or other action contemplated by this
clause (i) could not reasonably be expected to be adverse to the interests of
the Lenders under the Credit Documents in any material respect (it being
understood and agreed that the adoption of a Permitted Rights Plan shall be
permitted), (ii) amend, modify or change, or permit the amendment, modification
or change of any provision of any New Senior Subordinated Notes or the New
Senior Subordinated Notes Documents unless such amendment, modification or
change to the New Senior Subordinated Notes Documents could not be adverse to
the interests of the Lenders in any respect (it being understood and agreed
that, in no event shall any amendment be permitted which relates to the
subordination provisions contained in the New Senior Subordinated Notes
Documents), (iii) after giving effect to the amendments effected pursuant to the
Existing Senior Secured Notes Tender Offer/Consent Solicitation, amend, modify
or change, or permit the amendment, modification or change of, any provision of
any Existing Senior Secured Notes or the Existing Senior Secured Notes Documents
unless such amendment, modification or change to the Existing Senior Secured
Notes Documents could not be adverse to the interest of the Lenders in any
respect or (iv) make (or give any notice in respect of) any voluntary or
optional payment or prepayment on or redemption or acquisition for value of
(including, without limitation, by way of depositing with the trustee with
respect thereto or any Person money or securities before due for the purpose of
paying when due), exchange or purchase, redeem or acquire for value (whether as
a result of a Change of Control, the consummation of asset sales or otherwise)
any Existing Senior Secured Note or any New Senior Subordinated Note, in each
case except to the extent expressly permitted pursuant to Section 9.03.
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9.13 Limitation on Certain Restrictions on Subsidiaries. The U.S.
Borrower will not permit any of its Subsidiaries to, directly or indirectly,
create or otherwise cause or suffer to exist or become effective any encumbrance
or restriction on the ability of any such Subsidiary to (a) pay dividends or
make any other distributions on its capital stock or any other interest or
participation in its profits owned by the U.S. Borrower or any of its
Subsidiaries, or pay any Indebtedness owed to the U.S. Borrower or any of its
Subsidiaries, (b) make loans or advances to the U.S. Borrower or any of its
Subsidiaries or (c) transfer any of its properties or assets to the U.S.
Borrower or any of its Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (i) applicable law, (ii) this
Agreement and the other Credit Documents, (iii) the New Senior Subordinated
Notes and the other New Senior Subordinated Notes Documents, (iv) customary
provisions restricting subletting or assignment of any lease governing a
leasehold interest of the U.S. Borrower or any of its Subsidiaries, (v)
customary provisions restricting assignment of any licensing agreement entered
into by the U.S. Borrower or any of its Subsidiaries in the ordinary course of
business, and (vi) restrictions on the transfer of any asset subject to a Lien
permitted by Sections 9.01(iii), (vii), (viii), (xiv) or (xvi), and (vii) any
restriction with respect to a Subsidiary of the U.S. Borrower imposed pursuant
to an agreement entered into for the sale or disposition of all or substantially
all of the capital stock or assets of such Subsidiary, so long as the respective
sale or disposition is permitted pursuant to Section 9.02, pending the close of
such sale or disposition.
9.14 Limitation on Issuance of Capital Stock. Subject to receipt
of Subsidiary Stock Restrictions Requisite Gaming approvals, the U.S. Borrower
will not permit any of its respective Subsidiaries to issue any capital stock
(including by way of sales of treasury stock) or any options or warrants to
purchase, or securities convertible into, capital stock, except (i) for
transfers and replacements of then outstanding shares of capital stock, (ii) for
stock splits, stock dividends and other issuances which do not decrease the
percentage ownership of the U.S. Borrower or any of its Subsidiaries in any
class of the capital stock of such Subsidiary, (iii) to qualify directors to the
extent required by applicable law, (iv) issuances to the U.S. Borrower and its
Wholly-Owned Subsidiaries, so long as such issuances in no event reduce the
percentage of the capital stock of the respective issuer (if any) pledged at
such time pursuant to the Security Documents and (v) in the case of the German
Parent or other entity described in Section 9.02(ix), issuances permitted
pursuant to Section 9.02(ix).
9.15 Business. The U.S. Borrower will not, and will not permit
any of its Subsidiaries to, engage (directly or indirectly) in any business
other than a Gaming Business.
9.16 Limitation on Creation of Subsidiaries. (a) Except as
otherwise specifically provided in following clause (b), the U.S. Borrower will
not, and will not per-
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mit any of its Subsidiaries to, establish, create or acquire after the Initial
Borrowing Date any Subsidiary; provided that, (i) the U.S. Borrower and its
Wholly-Owned Subsidiaries shall be permitted to establish or create Wholly-Owned
Subsidiaries so long as the capital stock of such new Subsidiary that is owned
by any Credit Party is pledged pursuant to, and to the extent required by, the
U.S. Pledge Agreement or other relevant Security Document and the certificates
representing such stock, together with stock powers duly executed in blank, are
delivered to the Collateral Agent for the benefit of the Secured Creditors, (ii)
such new Subsidiary, if a Domestic Subsidiary or a German Subsidiary, executes a
counterpart of the U.S. Subsidiaries Guaranty or the German Subsidiaries
Guaranty, as is appropriate, and (x) in the case of any Domestic Subsidiary, the
U.S. Pledge Agreement and the U.S. Security Agreement and (y) in the case of the
German Subsidiary, such other security documentation as may be requested by the
Administrative Agent, the Collateral Agent or the Required Lenders, and (iii)
such new Subsidiary, to the extent requested by the Administrative Agent or the
Required Lenders, takes all actions required pursuant to Section 8.11. In
addition, each new Wholly-Owned Subsidiary shall execute and deliver, or cause
to be executed and delivered, all other relevant documentation of the type
described in Section 5 as such new Subsidiary would have had to deliver if such
new Subsidiary were a Credit Party on the Initial Borrowing Date. Without
prejudice to the preceding provisions of this Section 9.16(a), the Collateral
Agent may require that the capital stock of a new Subsidiary (in the case of a
Foreign Subsidiary, subject to limitations on the percentage of voting stock
required to be pledged which are consistent with the limitations provided in the
Security Documents as originally in effect) be pledged pursuant to an agreement
in a form suitable for enforcement in the jurisdiction in which the new
Subsidiary in incorporated.
(b) In addition to Subsidiaries created pursuant to preceding
clause (a), the U.S. Borrower may establish or acquire one or more Subsidiaries
after the Initial Borrowing Date as a result of Investments expressly permitted
to be made pursuant to Section 9.05 or acquisitions expressly permitted pursuant
to Section 9.02; provided that (x) all capital stock of each such Subsidiary
shall be pledged by any Credit Party which owns same to the extent required by
the U.S. Pledge Agreement or other relevant Security Document and (y) if any
such Subsidiary is, or becomes, a Wholly-Owned Subsidiary of the U.S. Borrower,
such Subsidiary shall at such time take all actions as would otherwise be
required pursuant to Section 9.16(a) in connection with the creation of a new
Wholly-Owned Subsidiary.
(c) Notwithstanding anything to the contrary contained above, if
any Subsidiary created, acquired or established as contemplated above in this
Section 9.16 is a Specified Non-Material Subsidiary, such Subsidiary shall not
be required to execute and deliver a Guaranty or any Security Documents, in each
case except to the extent thereafter required in accordance with the provisions
of Section 8.14. Furthermore, no action shall be required pursuant to the
foregoing provisions of this Section 9.16 to the extent the taking of such
action would violate applicable law. If, and to the extent, the immediately
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preceding sentence is applicable, at the request of the Administrative Agent or
the Required Lenders, the U.S. Borrower will, and will cause each of its
Subsidiaries to, take all action as may be reasonably requested to obtain any
necessary approvals or to isolate the assets which would give rise to the
respective violation, or cause the respective Gaming Regulations to apply, in a
special purpose Subsidiary of the U.S. Borrower, as is intended to be done with
the Missouri License Subsidiary pursuant to Section 13.18.
SECTION 10. Events of Default. Upon the occurrence of any of the
following specified events (each an "Event of Default"):
10.01 Payments. Any Borrower shall (i) default in the payment when
due of any principal of any Loan or any Note or (ii) default, and such default
shall continue unremedied for three or more Business Days, in the payment when
due of any interest on any Loan or Note, any Unpaid Drawing or any Fees or any
other amounts owing hereunder or thereunder; or
10.02 Representations, etc. Any representation, warranty or
statement made by any Credit Party herein or in any other Credit Document or in
any certificate delivered to the Administrative Agent or any Lender pursuant
hereto or thereto shall prove to be untrue in any material respect on the date
as of which made or deemed made; or
10.03 Covenants. Any Credit Party shall (i) default in the due
performance or observance by it of any term, covenant or agreement contained in
Section 8.01(g)(i), 8.08 or 8.13 or Section 9 or (ii) default in the due
performance or observance by it of any other term, covenant or agreement
contained in this Agreement or any other Credit Document (other than those set
forth in Sections 10.01 and 10.02 and clause (ii) of this Section 10.03) and
such Default as described in this clause (ii) shall continue unremedied for a
period of 30 days after written notice thereof to the U.S. Borrower by the
Administrative Agent or any Lender; or
10.04 Default Under Other Agreements. (i) The U.S. Borrower or any
of its Subsidiaries shall (x) default in any payment of any Indebtedness (other
than the Notes) beyond the period of grace, if any, provided in the instrument
or agreement under which such Indebtedness was created or (y) default in the
observance or performance of any agreement or condition relating to any
Indebtedness (other than the Notes) or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause, without any further notice
(other than notice of acceleration or demand for payment) or any further lapse
of time, such Indebtedness to become due prior to its stated maturity, or (ii)
any Indebtedness (other than the Notes) of the U.S. Borrower or any of its
Subsidiaries shall be declared to be (or shall become) due and payable, or
required to be prepaid other than by a regularly scheduled required
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prepayment, prior to the stated maturity thereof, provided that it shall not be
a Default or an Event of Default under this Section 10.04 unless the aggregate
principal amount of all Indebtedness as described in preceding clauses (i) and
(ii) is at least $2,500,000 (or in the case of currencies other than Dollars,
the Dollar Equivalent thereof); or
10.05 Bankruptcy, etc. The U.S. Borrower or any of its
Subsidiaries (excluding Insignificant Subsidiaries) shall commence a voluntary
case concerning itself under Title 11 of the United States Code entitled
"Bankruptcy," as now or hereafter in effect, or any successor thereto (the
"Bankruptcy Code"); or an involuntary case is commenced against the U.S.
Borrower or any of its Subsidiaries (excluding Insignificant Subsidiaries), and
the petition is not controverted within 15 days, or is not dismissed within 60
days, after commencement of the case; or a custodian (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or substantially all
of the property of the U.S. Borrower or any of its Subsidiaries (excluding
Insignificant Subsidiaries), or the U.S. Borrower or any of its Subsidiaries
(excluding Insignificant Subsidiaries) commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency, receivership, administration or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the U.S. Borrower or
any of its Subsidiaries (excluding Insignificant Subsidiaries), or there is
commenced against the U.S. Borrower or any of its Subsidiaries (excluding
Insignificant Subsidiaries) any such proceeding which remains undismissed for a
period of 60 days, or the U.S. Borrower or any of its Subsidiaries (excluding
Insignificant Subsidiaries) is adjudicated insolvent or bankrupt; or any order
of relief or other order approving any such case or proceeding is entered; or
the U.S. Borrower or any of its Subsidiaries (excluding Insignificant
Subsidiaries) suffers any appointment of any custodian, administrator,
administrative receiver or the like for it or any substantial part of its
property to continue undischarged or unstayed for a period of 60 days; or the
U.S. Borrower or any of its Subsidiaries (excluding Insignificant Subsidiaries)
makes a general assignment for the benefit of creditors; or any corporate action
is taken by the U.S. Borrower or any of its Subsidiaries (excluding
Insignificant Subsidiaries) for the purpose of effecting any of the foregoing;
or
10.06 ERISA. (a) Any Plan shall fail to satisfy the minimum
funding standard required for any plan year or part thereof under Section 412 of
the Code or Section 302 of ERISA or a waiver of such standard or extension of
any amortization period is sought or granted under Section 412 of the Code or
Section 303 or 304 of ERISA, a Reportable Event shall have occurred, a
contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan
subject to Title IV of ERISA shall be subject to the advance reporting
requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph
(b)(1) thereof) and an event described in subsection .62, .63, .64, .65, .66,
.67 or .68 of PBGC Regulation Section 4043 shall be reasonably expected to occur
with respect to such Plan within the following 30 days, any Plan which is
subject to Title IV of ERISA shall have had or is likely to have a trustee
appointed to administer such Plan, any
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Plan which is subject to Title IV of ERISA is, shall have been or is likely to
be terminated or to be the subject of termination proceedings under ERISA, any
Plan shall have an Unfunded Current Liability, a contribution required to be
made with respect to a Plan or a Foreign Pension Plan has not been timely made,
the U.S. Borrower or any Subsidiary of the U.S. Borrower or any ERISA Affiliate
has incurred or is likely to incur any liability to or on account of a Plan
under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or
4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or on account of a
group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2)
of the Code) under Section 4980B of the Code, or the U.S. Borrower or any
Subsidiary of the U.S. Borrower has incurred or is likely to incur liabilities
pursuant to one or more employee welfare benefit plans (as defined in Section
3(1) of ERISA) that provide benefits to retired employees or other former
employees (other than as required by Section 601 of ERISA) or Plans or Foreign
Pension Plans; (b) there shall result from any such event or events the
imposition of a lien, the granting of a security interest, or a liability or a
material risk of incurring a liability; and (c) such lien, security interest or
liability, individually, and/or in the aggregate has had, or could reasonably be
expected to have, a Material Adverse Effect; or
10.07 Security Documents. At any time after the execution and
delivery thereof, (i) any of the Security Documents (except as expressly
provided by the terms thereof) shall cease to be in full force and effect, or
shall cease to give the Collateral Agent for the benefit of the Secured
Creditors the Liens, rights, powers and privileges purported to be created
thereby (including, without limitation, a perfected security interest in, and
Lien on, all of the Collateral to the extent required in accordance with the
requirements of the respective Security Documents, in favor of the Collateral
Agent, superior to and prior to the rights of all third Persons (except as
permitted by Section 9.01), and subject to no other Liens (except as permitted
by Section 9.01), or (ii) any Credit Party shall default, and in the case of
this clause (ii) such default shall continue unremedied for a period of 30 days
after written notice thereof to the U.S. Borrower by the Administrative Agent,
the Collateral Agent or any Lender, in the due performance or observance of any
term, covenant or agreement on its part to be performed or observed pursuant to
any of the Security Documents and such default shall continue beyond any grace
period specifically applicable thereto pursuant to the terms of such Security
Document; or
10.08 Guaranties. Except in accordance with the express terms of
the respective Guaranty, any Guaranty or any provision thereof shall cease to be
in full force or effect as to the relevant Guarantor, or any Guarantor or Person
acting by or on behalf of such Guarantor shall deny or disaffirm such
Guarantor's obligations under the relevant Guaranty; or
10.09 Judgments. One or more judgments or decrees shall be entered
against the U.S. Borrower or any Subsidiary of the U.S. Borrower involving in
the
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aggregate for the U.S. Borrower and its Subsidiaries a liability (not paid or
fully covered by a reputable and solvent insurance company) and such judgments
and decrees either shall be final and non-appealable or shall not be vacated,
discharged or stayed or bonded pending appeal for any period of 30 consecutive
days, and the aggregate amount of all such judgments exceeds $1,000,000 (or in
the case of currencies other than Dollars, the Dollar Equivalent thereof); or
10.10 Change of Control. A Change of Control shall occur; or
10.11 Gaming Licenses. At any time after the Effective Date, the
U.S. Borrower or any of its Subsidiaries shall lose, or fail to obtain, any
Gaming License or Gaming Licenses if the aggregate effect of all such losses and
failures at any time is reasonably likely to result in a Material Adverse
Effect; or
10.12 Bailee Agreement. Except in accordance with the express
terms thereof, any Bailee Agreement or any provision thereof shall cease to be
in full force or effect, or the Bailee under any Bailee Agreement shall (except
to the extent it has turned over all Collateral held by it to the Collateral
Agent) default in its obligations thereunder or notify the Administrative Agent,
the Collateral Agent, any Lender or the U.S. Borrower or any of its Subsidiaries
that it no longer holds the collateral thereunder for the benefit of the
Collateral Agent and the Secured Creditors; or
10.13 Subsidiary Stock Restrictions. At any time on or prior to
the Subsidiary Stock Restrictions Approval Date, any Lien shall be created with
respect to, or any disposition shall occur with respect to, any capital stock or
any Subsidiary or the U.S. Borrower identified in the definition of "Subsidiary
Stock Restrictions" contained herein if such Lien or disposition, as the case
may be, would not have been permitted if the Subsidiary Stock Restrictions
contained in this Agreement were then fully effective in accordance with the
terms thereof;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Administrative Agent, upon the written request of
the Required Lenders, shall by written notice to the Borrowers, take any or all
of the following actions, without prejudice to the rights of the Administrative
Agent, any Lender or the holder of any Note to enforce its claims against any
Credit Party (provided, that, if an Event of Default specified in Section 10.05
shall occur with respect to any Borrower, the result which would occur upon the
giving of written notice by the Administrative Agent as specified in clauses (i)
and (ii) below shall occur automatically without the giving of any such notice):
(i) declare the Total Commitments terminated, whereupon all Commitments of each
Lender shall forthwith terminate immediately and any Commitment Commission shall
forthwith become due and payable without any other notice of any kind; (ii)
declare the principal of and any accrued interest in respect of all Loans and
the Notes and all Obligations owing hereunder and thereunder to be, whereupon
the same shall become,
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forthwith due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by each Credit Party; (iii)
terminate any Letter of Credit which may be terminated in accordance with its
terms; (iv) direct the U.S. Borrower to pay (and U.S. Borrower agrees that upon
receipt of such notice, or upon the occurrence of an Event of Default specified
in Section 10.05 with respect to any Borrower, it will pay) to the Collateral
Agent at the appropriate Payment Office such additional amount of cash, to be
held as security by the Collateral Agent, as is equal to the aggregate Stated
Amount of all U.S. Letters of Credit then outstanding; (v) direct the German
Borrowers to pay (and the German Borrowers jointly and severally agree that upon
receipt of such notice, or upon the occurrence of an Event of Default specified
in Section 10.05 with respect to any Borrower, it will pay) to the Collateral
Agent at the appropriate Payment Office such additional amount of cash, to be
held as security by the Collateral Agent, as is equal to the aggregate Stated
Amount of all German Letters of Credit then outstanding; (vi) enforce, as
Collateral Agent, all of the Liens and security interests created pursuant to
the Security Documents; and (vii) apply any cash collateral held pursuant to
Section 4.02 to the repayment of the Obligations of the U.S. Borrower or the
German Borrowers, as the case may be.
SECTION 11. Definitions and Accounting Terms.
11.01 Defined Terms. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"A PIK Preferred Holdback Amount" shall mean $0.
"A Share" shall mean, for each Lender with a U.S. Borrower Tranche
A Term Loan Commitment, a fraction the numerator of which is the U.S. Borrower
Tranche A Term Loan Commitment of such Lender at such time and the denominator
of which is the Total U.S. Borrower Tranche A Term Loan Commitment at such time.
"Account Party" shall mean (x) in the case of each U.S. Letter of
Credit, the U.S. Borrower and (y) in the case of each German Letter of Credit,
both of the German Borrowers, as joint and several account parties with respect
such Letter of Credit.
"Acquired Indebtedness" means, with respect to any specified
Person, Indebtedness of any other Person (the "Acquired Person") existing at the
time such Acquired Person becomes a Subsidiary of or merges or consolidates with
such specified Person or any of its Subsidiaries pursuant to a Permitted
Acquisition (and not redeemed, defeased, retired or otherwise repaid at the time
of or upon consummation of such merger or acquisition) or Indebtedness assumed
in connection with the acquisition of assets from such Acquired Person pursuant
to a Permitted Acquisition, but in each case excluding any Indebtedness incurred
or secured by Liens (on additional assets or otherwise) in connection
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with, or in anticipation or contemplation of, such Acquired Person merging or
consolidating with, or becoming a Subsidiary of, such specified Person.
"Additional Guaranty" shall mean any guaranty executed and
delivered by a Domestic Subsidiary of the U.S. Borrower in accordance with
relevant requirements of Sections 8.11, 8.14 or 9.16 of this Agreement.
"Additional Security Documents" shall have the meaning provided in
Section 8.11.
"Adjusted Consolidated Net Income" for any period shall mean
Consolidated Net Income for such period plus, without duplication, the sum of
the amount of all net non-cash charges (including, without limitation,
depreciation, amortization, deferred tax expense, non-cash interest expense) and
net non-cash losses which were included in arriving at Consolidated Net Income
for such period less all net non-cash gains included in arriving at Consolidated
Net Income for such period; provided that gains or losses from sales of assets
(other than sales of inventory in the ordinary course of business) shall be
excluded to the extent same would otherwise be included in Adjusted Consolidated
Net Income for the respective period.
"Adjusted Consolidated Working Capital" at any time shall mean
Consolidated Current Assets (but excluding therefrom all cash and Cash
Equivalents) less Consolidated Current Liabilities at such time.
"Administrative Agent" shall mean Credit Suisse First Boston, in
its capacity as Administrative Agent for the Lenders hereunder, and shall
include any successor to the Administrative Agent appointed pursuant to Section
12.09.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with, such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the voting securities, of a
Person shall be deemed to be control.
"Affiliate Transactions" shall have the meaning provided in
Section 9.06.
"Aggregate Non-German Revolving Exposure" at any time shall mean
the aggregate principal amount of all Dollar Revolving Loans and Swingline Loans
then outstanding and the aggregate amount of all U.S. Letter of Credit
Outstandings at such time.
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"Agreement" shall mean this Credit Agreement, as modified,
supplemented or amended (including any amendment and restatement hereof) from
time to time.
"Applicable Commitment Commission Percentage" and "Applicable
Margin" shall mean, during each Margin Adjustment Period beginning after the
Initial Borrowing Date, the percentage set forth below opposite the respective
Tranche of Loan (or opposite Applicable Commitment Commission Percentage in the
case of the Applicable Commitment Commission Percentage) and under the
respective Level (i.e., Level 1, Level 2, Level 3, Level 4, Level 5 or Level 6,
as the case may be) indicated to have been achieved on the applicable Test Date
for such Margin Adjustment Period (as shown in the respective officer's
certificate delivered pursuant to Section 8.01(f)):
Level 1: Leverage Ratio is less than 3.00 to 1.
Level 2: Leverage Ratio is greater than or equal to 3.00 to 1 but less than 3.50
to 1.
Level 3: Leverage Ratio is greater than or equal to 3.50 to 1 but less than 4.00
to 1.
Level 4: Leverage Ratio is greater than or equal to 4.00 to 1 but less than 4.50
to 1.
Level 5: Leverage Ratio is greater than or equal to 4.50 to 1 but less than 4.75
to 1.
Level 6: Leverage Ratio is greater than or equal to 4.75 to 1.
<TABLE>
<CAPTION>
Level Level Level Level Level Level
Ratio 1 2 3 4 5 6
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Euro Rate Loan
Margin for U.S.
Borrower Tranche A
Term Loans, German
Borrower Tranche A
Term Loans and Re-
volving Loans 1.00% 1.25% 1.50% 1.75% 2.00% 2.25%
Base Rate Loan
Margin for U.S.
Borrower Tranche A
Term Loans,
Revolving Loans and
Swingline Loans 0.00% 0.25% 0.50% 0.75% 1.00% 1.25%
Euro Rate Loan
Margin for Delayed
Draw Term Loans and
Tranche B Term
Loans 2.25% 2.25% 2.25% 2.50% 2.50% 2.75%
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Base Rate Loan
Margin for Delayed
Draw Term Loans and
Tranche B Term
Loans 1.25% 1.25% 1.25% 1.50% 1.50% 1.75%
Euro Rate Loan
Margin for
Tranche C Term
Loans 2.50% 2.50% 2.50% 2.75% 2.75% 3.00%
Base Rate Loan
Margin for Tranche
C Term Loans 1.50% 1.50% 1.50% 1.75% 1.75% 2.00%
Applicable Commit-
ment Commission
Percentage 0.20% 0.25% .375% 0.40% 0.45% 0.50%
</TABLE>
; provided, however, that if the U.S. Borrower fails to deliver the officer's
certificate as described in Section 8.01(f) by the date required by such
Section, then Level 6 Pricing shall apply for the period from the date upon
which the respective certificate is required to be delivered pursuant to said
Section 8.01(f) until the date of the actual delivery thereof (except that, to
the extent the respective certificate is delivered within one week of the date
when required pursuant to the terms of this Agreement and before the respective
payment of Commitment Commission or interest is required to be made, the
respective payment shall be based on the certificate actually delivered).
Furthermore, and notwithstanding anything to the contrary contained above, (i)
for the period from the Effective Date to but not including the first Start Date
after the U.S. Borrower's fiscal quarter ended September 30, 1997, Level 6
pricing shall apply, (ii) if at any time after the 270th day after the Initial
Borrowing Date, either (x) the Collateral Agent has not received a pledge of all
the capital stock of the Subsidiaries of the U.S. Borrower (excluding the
Missouri License Subsidiary, so long as established as contemplated by Section
13.18 but in any event including all the capital stock of Bally Gaming
International, Inc. and Bally Gaming, Inc.) which would be required to be
pledged pursuant to the Security Documents, in the absence of otherwise
applicable requirements of law (including without limitation requirements of
applicable Gaming Regulations, Gaming Authorities or requirements to obtain
Gaming Licenses) or (y) the Subsidiary Stock Restrictions Approval Date has not
theretofore occurred, then at all times when either (x) any capital stock of any
Subsidiary of the U.S. Borrower (excluding the Missouri License Subsidiary)
which would otherwise be required to be pledged pursuant to the relevant
Security Documents is not pledged because of the requirements of applicable law
(including, without limitation, all Gaming Regulations) or the need to obtain
Gaming Approvals or the requirements of any Gaming License, and at any time
prior to the occurrence of the Subsidiary Stock Restrictions Approval Date, all
percentages set forth in the table above (other than Applicable Commitment
Commission Percentage) shall be deemed to be increased by .50%, and (iii) Level
6 pricing shall apply at all times when any Default exists under Section 10.01
or
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10.05, or when any Event of Default (excluding Events of Default arising
pursuant to clause (ii) of Section of 10.03, unless the respective Event of
Default is as a result of a failure to deliver information required pursuant to
Section 8.01(b), (c), (f) or (j)) exists.
"Applicable Currency" shall mean Dollars or Deutsche Marks, as
the case may be.
"Applicable Gaming Regulations" shall have the meaning provided in
Section 13.18(a).
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than sales and leases of assets or rights in the
ordinary course of business, including, without limitation, sales of inventory
and damaged, surplus or obsolete property in the ordinary course of business and
(ii) the issue or sale by U.S. Borrower or any of its Subsidiaries of Equity
Interests of any of the U.S. Borrower's Subsidiaries, in the case of either
clause (i) or (ii), whether in a single transaction or a series of related
transactions (a) that have a fair market value in excess of $100,000 or (b) for
net proceeds in excess of $100,000. Notwithstanding the foregoing, the following
will not be deemed to be Asset Sales: (i) transfers of assets between the U.S.
Borrower and/or one or more of its Subsidiaries in accordance with the relevant
requirements of Section 9.02; (ii) an issuance of Equity Interests by a
Subsidiary of the U.S. Borrower to the U.S. Borrower or to another Subsidiary of
the U.S Borrower; (iii) a Restricted Payment that is permitted pursuant to
Section 9.03; and (iv) an Investment permitted pursuant to Section 9.05.
"Assignment and Assumption Agreement" shall mean the Assignment
and Assumption Agreement substantially in the form of Exhibit P (appropriately
completed).
"Authorized Officer" of any Credit Party shall mean any of the
President, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
any Vice-President, the Secretary or any Assistant Secretary of such Credit
Party or any other officer of such Credit Party which is designated in writing
to the Administrative Agent, CSFB and the Issuing Bank by any of the foregoing
officers of such Credit Party as being authorized to give such notices under
this Agreement.
"Authorized Telephone Officer" shall mean (x) in respect of the
U.S. Borrower, any of Scott Schweinfurth, Steve Des Champs, John Garner and
Cindy Tregaskis or (y) in the case of the German Borrowers, any of Ernst
Konnecke, Renata Oden and Ingrid Schwan, and in each case such additional
Authorized Officers as may from time to time be designated in writing to the
Administrative Agent by any of the foregoing officers of the U.S. Borrower or,
in the case of clause (y) only, the German Borrowers as being an Authorized
Telephone Officer for purposes of this Agreement.
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"B PIK Preferred Holdback Amount" shall mean $50,595,200.
"B Share" shall mean, for each Lender with a Tranche B Term Loan
Commitment, a fraction the numerator of which is the Tranche B Term Loan
Commitment of such Lender at such time and the denominator of which is the Total
Tranche B Term Loan Commitment at such time.
"Bailee" shall mean any bailee party to a Bailee Agreement.
"Bailee Agreement" shall have the meaning provided in Section
5A.06.
"Bally Gaming International GmbH Senior Secured Loans" shall mean
loans made by either German Borrower to Bally Gaming International GmbH, which
loans shall be evidenced by intercompany promissory notes pledged by the
respective German Borrower pursuant to the German Security Documents and which
intercompany notes shall be secured by the inventory and receivables of Bally
Gaming International GmbH (or such inventory and receivables of Bally Gaming
International GmbH which are to be included as German Eligible Inventory or
German Eligible Receivables, as the case may be). All Bally Gaming International
GmbH Senior Secured Loans shall be made pursuant to promissory notes in form and
substance reasonably satisfactory to the Administrative Agent, and the
Administrative Agent shall have received satisfactory opinions of counsel as to
the validity thereof and of the security interests created to secure same.
"Bally Wulff Automaten" shall have the meaning provided in the
first paragraph of this Agreement.
"Bally Wulff Vertriebs" shall have the meaning provided in the
first paragraph of this Agreement.
"Bank Information Memorandum" shall mean the Confidential
Memorandum, dated July, 1997, of the U.S. Borrower with respect to this
Agreement, which was distributed to the Lenders prior to the Initial Borrowing
Date.
"Bankruptcy Code" shall have the meaning provided in Section
10.05.
"Base Rate" at any time shall mean the higher of (i) 1/2 of 1% in
excess of the overnight Federal Funds Rate and (ii) the Prime Lending Rate.
"Base Rate Loan" shall mean each Dollar Loan designated or deemed
designated as such by the U.S. Borrower at the time of the incurrence thereof or
conversion thereto.
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"BGI Chattel Paper" shall mean Chattel Paper evidencing
obligations of account debtors to Bally Gaming, Inc., arising from the sale of
inventory on an installment basis in the ordinary course of business.
"Borrowers" shall have the meaning provided in the first paragraph
of this Agreement.
"Borrowing" shall mean the borrowing of one Type of Loan of a
single Tranche from all the Lenders having Commitments of the respective Tranche
on a given date (or resulting from a conversion or conversions on such date)
having in the case of Euro Rate Loans the same Interest Period, provided that
Base Rate Loans incurred pursuant to Section 1.10(b) shall be considered part of
the related Borrowing of Eurodollar Loans.
"Borrowing Base Certificate" shall have the meaning provided in
Section 8.01(j).
"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day except Saturday, Sunday and any day which
shall be in New York City a legal holiday or a day on which banking institutions
are authorized or required by law or other government action to close and (ii)
with respect to all notices and determinations in connection with, and payments
of principal and interest on, Euro Rate Loans and German Letters of Credit, any
day which is a Business Day described in clause (i) above and which is also a
day for trading by and between banks in the London interbank market and which
shall not be a legal holiday or a day on which banking institutions are
authorized or required by law or other government action to close in the city
where the applicable Payment Office of the Administrative Agent is located in
respect of Euro Rate Loans or German Letters of Credit, as the case may be.
"C PIK Preferred Holdback Amount" shall mean $27,004,800.
"C Share" shall mean, for each Lender with a Tranche C Term Loan
Commitment, a fraction the numerator of which is the Tranche C Term Loan
Commitment of such Lender at such time and the denominator of which is the Total
Tranche C Term Loan Commitment at such time.
"Capital Expenditures" shall mean, with respect to any Person, all
expenditures by such Person which should be shown as capital expenditures in
accordance with generally accepted accounting principles and, without
duplication, the amount of Capitalized Lease Obligations incurred by such
Person.
"Capitalized Lease Obligations" of any Person shall mean all
rental obligations which, under generally accepted accounting principles, are or
will be required to be
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capitalized on the books of such Person, in each case taken at the amount
thereof accounted for as indebtedness in accordance with such principles.
"Cash Equivalents" means (i) United States dollars and German
Deutsche Marks, (ii) securities issued or directly fully guaranteed or insured
by the United States government or any agency or instrumentality thereof having
maturities of not more than six months from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any domestic commercial bank or commercial bank of a foreign country
recognized by the United States, in each case having capital and surplus in
excess of $500 million (or the foreign currency equivalent thereof) and has
outstanding debt which is rated "A" (or similar equivalent thereof) or higher by
at least one nationally recognized statistical rating organization (as defined
under Rule 436 under the Securities Act) or any money-market fund sponsored by a
registered broker dealer or mutual fund distributor, (iv) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clauses (ii) and (iii) above entered into with any financial
institution meeting the qualifications specified in clause (iii) above and (v)
commercial paper having one of the two highest ratings obtainable form Moody's
Investors Service, Inc. or Standard & Poor's Corporation and in each case
maturing within six months after the date of acquisition.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as the same may be amended from time to
time, 42 U.S.C. Section 9601 et seq.
"Change of Control" shall mean (i) the board of directors of the
U.S. Borrower shall at any time cease to consist of a majority of Continuing
Directors, (ii) any Person, entity or "group" (as such term is defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) (other than
a Permitted Holder) is or becomes the beneficial owner of an amount of
outstanding Voting Stock, or of outstanding common stock, of the U.S. Borrower
in excess of 35%, and the Permitted Holders own less than such Person, entity or
group (as defined above), of the total amount of fully diluted shares of
outstanding Voting Stock or common stock, as the case may be, of the U.S.
Borrower, or (iii) any Change of Control under, and as defined in, the New
Senior Subordinated Notes Indenture shall occur.
"Chattel Paper" shall mean any writing or writings which evidence
both a monetary obligation and the security interest in or a lease of specific
goods, which would constitute "chattel paper" under, and as defined in, the
Uniform Commercial Code as in effect in the State of Nevada.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from
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time to time, and the regulations promulgated and rulings issued thereunder.
Section references to the Code are to the Code, as in effect at the date of this
Agreement and any subsequent provisions of the Code, amendatory thereof,
supplemental thereto or substituted therefor.
"Collateral" shall mean all property (whether real or personal)
with respect to which any security interests have been granted (or purport to be
granted) pursuant to any Security Document, including, without limitation, all
U.S. Pledge Agreement Collateral, all U.S. Security Agreement Collateral, the
Mortgaged Properties, if any, and all cash and Cash Equivalents delivered as
collateral pursuant to Section 4.02 or 10 hereof.
"Collateral Agent" shall mean the Administrative Agent acting as
collateral agent for the Secured Creditors pursuant to the Security Documents.
"Commitment" shall mean any of the commitments of any Lender,
i.e., whether, the U.S. Borrower Tranche A Term Loan Commitment, the German
Borrower Tranche A Term Loan Commitment, the Delayed Draw Term Loan Commitment,
the Tranche B Term Loan Commitment, the Tranche C Term Loan Commitment or the
Revolving Loan Commitment.
"Commitment Commission" shall mean and include all Term Loan
Commitment Commission and all Revolving Loan Commitment Commission.
"Committed Financing" shall mean and include, at any time (i) the
Total Unutilized Revolving Loan Commitment under this Agreement at such time and
(ii) other financings permitted under this Agreement, as then in effect, for
which a binding commitment to provide same, extending for at least 270 days, is
then in place, which commitment, and the terms and conditions and issue thereof,
shall be reasonably satisfactory to the Administrative Agent and (iii) cash on
hand.
"Consolidated Cash Interest Expense" means, for any period,
Consolidated Interest Expense for such period, adjusted by excluding therefrom
all non-cash interest expense (i.e., interest expense which was not paid in cash
during the respective period and which does not represent regularly accruing
items which are required, or expected, to be paid in cash (other than through
the repayment of principal of the respective Indebtedness at maturity) during a
subsequent period) reflected therein.
"Consolidated Current Assets" shall mean, at any time, the
consolidated current assets of the U.S. Borrower and its Subsidiaries at such
time.
"Consolidated Current Liabilities" shall mean, at any time, the
consolidated current liabilities of the U.S. Borrower and its Subsidiaries at
such time, but excluding (i)
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the current portion of any long-term Indebtedness which would otherwise be
included therein and (ii) the current portion of Indebtedness constituting
Capitalized Lease Obligations.
"Consolidated EBITDA" shall mean, for any period, Consolidated Net
Income, adjusted by adding thereto the amount of all amortization and
depreciation and all interest and income or similar tax expense, in each case
that were deducted in arriving at Consolidated Net Income for such period. To
the extent that Consolidated EBITDA is being determined for any period during
which the transactions contemplated by Section 5B.02 were actually consummated,
determinations of Consolidated EBITDA for such period shall give pro forma
effect to the transactions effected as contemplated by said Section 5B.02 as if
same were consummated on the first day of such period.
"Consolidated Fixed Charge Coverage Ratio" for any period shall
mean the ratio of Consolidated EBITDA to Consolidated Fixed Charges for such
period.
"Consolidated Fixed Charges" for any period shall mean the sum,
without duplication, of (i) Consolidated Net Cash Interest Expense for such
period, (ii) the amount of all cash payments by the U.S. Borrower and its
Subsidiaries in respect of taxes or tax liabilities during such period (net of
any cash tax refunds actually received during such period), (iii) the scheduled
principal amount of all amortization payments on all Indebtedness (including,
without limitation, the principal component of all Capitalized Lease
Obligations) of the U.S. Borrower and its Subsidiaries for such period (as
determined on the first day of the respective period of, if later, on the
Initial Borrowing Date) and (iv) the aggregate amount of all Capital
Expenditures made by the U.S. Borrower and its Subsidiaries during such period
(but excluding (x) Capital Expenditures made pursuant to Section 9.07(c) and (y)
during each Test Period, not more than $2,500,000 of Capital Expenditures made
pursuant to Sections 9.07(a) and (b) which were financed pursuant to Capitalized
Lease Obligations or with proceeds of purchase money Indebtedness incurred from
third parties during the respective Test Period to finance same (but not with
proceeds of Loans pursuant to this Agreement)). Notwithstanding anything to the
contrary contained above, no amounts shall be included pursuant to clause (iii)
of the immediately preceding sentence in respect of Indebtedness to be
refinanced pursuant to the Refinancing.
"Consolidated Indebtedness" shall mean, at any time, the aggregate
amount of all Indebtedness of the U.S. Borrower and its Subsidiaries determined
on a consolidated basis with respect to borrowed money or other obligations of
such Persons which would appear on the balance sheet of such Persons as
indebtedness plus, to the extent same remains outstanding after the 45th day
after the Initial Borrowing Date, the aggregate liquidation preference of all
outstanding Existing PIK Preferred Stock. Notwithstanding anything to the
contrary contained above or pursuant to GAAP, to the extent the consolidated
balance sheet of the U.S. Borrower and its Subsidiaries reflects liabilities for
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jackpots payable (or other similar liabilities however designated), including
but not limited to jackpot liabilities with respect to progressive games, then
the aggregate amount of such liabilities, as reduced (but not below zero) by
amounts shown on the consolidated balance sheet of the U.S. Borrower and its
Subsidiaries as constituting assets in the nature of Cash Equivalents or
government securities pledged, deposited or "restricted" to offset said
liabilities, shall be included as (and shall be deemed to increase the amount
of) Consolidated Indebtedness.
"Consolidated Interest Coverage Ratio" for any period shall mean
the ratio of Consolidated EBITDA to Consolidated Interest Expense for such
period; provided that in determining the Consolidated Interest Coverage Ratio
for (i) the Test Period ended closest to December 31, 1997, Consolidated
Interest Expense for the two fiscal quarters then ended (taken as one accounting
period), multiplied by two, shall be used in lieu of Consolidated Interest
Expense for such period and (ii) for the Test Period ended closest to March 31,
1998, Consolidated Interest Expense for the three fiscal quarters then ended
(taken as one accounting period), multiplied by 4/3 shall be used in lieu of
Consolidated Interest Expense for such period.
"Consolidated Interest Expense" means, for any period, the sum,
without duplication, of (i) the consolidated interest expense of the U.S.
Borrower and its Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Interest Rate Protection Agreements or Other Hedging
Agreements), (ii) the consolidated interest expense of the U.S. Borrower and its
Subsidiaries that was capitalized during such period, and (iii) the product of
(a) all dividend payments, whether or not in cash, on any series of Preferred
Stock of such Person or any of its Subsidiaries, other than dividend payments on
Equity Interests payable solely in Equity Interests of the U.S. Borrower, times
(b) a fraction, the numerator of which is one and the denominator of which is
one minus the then current combined federal, state and local statutory tax rate
of the U.S. Borrower, expressed as a decimal, in each case, on a consolidated
basis and in accordance with GAAP. Notwithstanding anything to the contrary
contained above, Consolidated Interest Expense shall not, pursuant to clause
(iii) of the immediately preceding sentence, include any amounts in respect of
the Existing PIK Preferred Stock so long as same is redeemed within 45 days
after the Initial Borrowing Date.
"Consolidated Net Cash Interest Expense" means, for any period,
Consolidated Cash Interest Expense for such period, reduced by cash interest
income received by the U.S. Borrower and its Subsidiaries on a consolidated
basis during such period (but not including any interest income attributable
to Cash Equivalents or other Investments deposited or dedicated to the payment
of liabilities of the U.S. Borrower and
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its Subsidiaries, where such cash interest secures said obligation and is not
available to the U.S. Borrower and its Subsidiaries for their use).
"Consolidated Net Income" means for any period, the aggregate of
the Net Income of the U.S. Borrower and its Subsidiaries for such period, on a
consolidated basis, determined in accordance with GAAP; provided that (without
duplication of exclusions) (i) the Net Income (to the extent positive) of any
Person that is not a 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 paid in cash to the U.S. Borrower or a Wholly Owned Subsidiary
thereof, (ii) to the extent Consolidated Net Income reflects amounts
attributable to minority interests in Subsidiaries that are not Wholly-Owned
Subsidiaries of the U.S. Borrower, Consolidated Net Income shall be reduced by
the amounts attributable to such minority interests, (iii) the Net Income of any
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends and distributions by that Subsidiary of Net Income is not at the date
of determination permitted without any prior governmental approval (that has not
been obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary or its stockholders, (iv)
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded and (v) the
cumulative effect of a change in accounting principles shall be excluded.
"Contingent Obligation" shall mean, as to any Person, any
obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations ("primary obligations") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (x) for the purchase or payment of any such primary obligation or
(y) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (iv) otherwise to assure or hold
harmless the holder of such primary obligation against loss in respect thereof;
provided, however, that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as determined by such
Person in good faith.
"Continuing Directors" shall mean the directors of the U.S.
Borrower on
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the Initial Borrowing Date and each other director of the U.S. Borrower if such
director's nomination for election to the Board of Directors of the U.S.
Borrower is recommended by a majority of the then Continuing Directors.
"Credit Documents" shall mean this Agreement and, after the
execution and delivery thereof pursuant to the terms of this Agreement, each
Note, the Bailee Agreement, each Guaranty and each Security Document.
"Credit Event" shall mean the making of any Loan or the issuance
of any Letter of Credit.
"Credit Party" shall mean each Borrower and each Subsidiary
Guarantor.
"CSFB" shall mean Credit Suisse First Boston in its individual
capacity.
"Cumulative Net Income Amount" at any date shall mean (i) an
amount equal to 50% of Consolidated Net Income for the period (taken as one
accounting period) from the Initial Borrowing Date to the end of the U.S.
Borrower's most recently ended fiscal quarter for which financial statements
have been delivered to the Lenders pursuant to Section 8.01(b) or (c), as the
case may be, at the time of such determination, minus (ii) the aggregate amount
of consideration (including the amount of any Indebtedness assumed) in
connection with acquisitions effected pursuant to Section 9.02(ii) after the
Effective Date and on or prior to such date, in each case to the extent the
amount of such consideration was justified based on the Cumulative Net Income
Amount (as opposed to a usage of the $30 million provided in said clause (ii)),
minus (iii) the aggregate amount of Restricted Payments made (or, without
duplication, declared) pursuant to clause (ii) of Section 9.03 after the
Effective Date and prior to such date, minus (iv) the aggregate amount of
Investments made pursuant to Section 9.05(xvi) after the Effective Date and on
or prior to such date, minus (v) the aggregate amount of Capital Expenditures
made after the Effective Date and prior to such date pursuant to Section
9.07(c)(iv).
"Default" shall mean any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Defaulting Lender" shall mean any Lender with respect to which a
Lender Default is in effect.
"Delayed Draw Scheduled Repayment" shall have the meaning provided
in Section 4.02(b)(iii).
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"Delayed Draw Scheduled Repayment Date" shall have the meaning
provided in Section 4.02(b)(iii).
"Delayed Draw Term Loan" shall have the meaning provided in
Section 1.01(c).
"Delayed Draw Term Loan Borrowing Date" shall mean each date on or
after the Initial Borrowing Date and on or prior to the Delayed Draw Term Loan
Commitment Termination Date on which Delayed Draw Term Loans are incurred
hereunder.
"Delayed Draw Term Loan Commitment" shall mean, for each Lender,
the amount set forth opposite such Lender's name in Schedule I-A directly below
the column entitled "Delayed Draw Term Loan Commitment", as the same may be (x)
reduced from time to time pursuant to Sections 3.03, 4.02 and/or 10 or (y)
adjusted from time to time as a result of assignments to or from such Lender
pursuant to Section 1.13 or 13.04(b).
"Delayed Draw Term Loan Commitment Termination Date" shall mean
January 31, 1998.
"Delayed Draw Term Loan Maturity Date" shall mean January 31,
2005.
"Delayed Draw Term Note" shall have the meaning provided in
Section 1.05(a).
"Deutsche Mark Equivalent" of an amount denominated in a currency
other than Deutsche Marks (the "Other Applicable Currency") shall mean, at any
time for the determination thereof, the amount of Deutsche Marks which could be
purchased with the amount of such Other Applicable Currency involved in such
computation at the spot rate of exchange therefor as quoted by the
Administrative Agent as of 11:00 A.M. (Frankfurt time) on the date two Business
Days prior to the date of any determination thereof for purchase on such date;
provided that to the extent this Agreement requires the calculation of the
Deutsche Mark Equivalent of the Stated Amount of any German Letter of Credit
issued in a currency other than Deutsche Marks, the Deutsche Mark Equivalent of
such Other Applicable Currency shall be revalued on a quarterly basis using the
spot exchange rate therefor quoted in the Wall Street Journal on the last
Business Day of each calendar quarter; provided, however, that the
Administrative Agent may revalue the Deutsche Mark Equivalent of any such
amounts described in the preceding proviso of this definition at any time at its
sole discretion or at the direction of the Required Lenders.
"Deutsche Mark Euro Rate" means, in respect of Deutsche Marks for
an Interest Period, the rate per annum determined by the Administrative Agent at
approximately 11:00 a.m. (London time) on the date which is two Business Days
prior to the beginning of the relevant Interest Period (as specified in the
applicable Notice of Borrowing or Notice of Conversion) by reference to the
"British Bankers' Association Interest Settlement Rates" for deposits in
Deutsche Marks (as set forth by any service
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selected by the Administrative Agent which has been nominated by the British
Bankers' Association as an authorized information vendor for the purpose of
displaying such rates) for a period equal to such Interest Period (rounded, if
necessary, upward to the nearest whole multiple of 1/16th of 1%); provided that,
to the extent that an interest rate is not ascertainable pursuant to the
foregoing provisions of this definition, the "Deutsche Mark Euro Rate" shall be
the interest rate per annum determined by the Administrative Agent to be the
rate (rounded, if necessary, upward to the nearest whole multiple of 1/16th of
1% per annum, if such average is not such a multiple) per annum at which
deposits in Deutsche Marks are offered for such relevant Interest Period to
major banks in the London interbank market in London, England by CSFB at
approximately 11:00 a.m. (London time) on the date which is two Business Days
prior to the beginning of such Interest Period. Notwithstanding anything to the
contrary contained above, in the event the Administrative Agent has made any
determination pursuant to Section 1.10(a)(i) in respect of Deutsche Mark Loans,
or in the circumstances described in clause (i) to the proviso to Section
1.10(b) in respect to Deutsch Mark Loans, the Deutsche Mark Euro Rate determined
pursuant to this definition shall instead be the rate determined by CSFB as the
all-in-cost of funds for CSFB to fund a Deutsche Mark Loan with maturities
comparable to the Interest Period applicable thereto.
"Deutsche Mark Loan" shall mean each German Borrower Tranche A
Term Loan and each Deutsche Mark Revolving Loan.
"Deutsche Mark Revolving Loan" shall have the meaning provided in
Section 1.01(f).
"Deutsche Mark Revolving Note" shall have the meaning provided in
Section 1.05(a).
"Deutsche Marks" and "DM" shall mean (i) freely and transferable
lawful money of the Federal Republic of Germany and (ii) in the event that the
Deutsche Mark is replaced by a European Currency of the European Union (the
"Euro"), Euros having a corresponding value, calculated in accordance with the
relevant provisions of the treaty on the European Union.
"Distribution" with respect to any Person shall mean that such
Person has declared or paid a dividend or returned any equity capital to its
stockholders or partners or authorized or made any other distribution, payment
or delivery of property (other than common stock of the U.S. Borrower) or cash
to its stockholders or partners as such, or redeemed, retired, purchased or
otherwise acquired, directly or indirectly, for any consideration (other than
for common stock of the U.S. Borrower) any shares of any class of its capital
stock or any partnership interests outstanding on or after the Effective Date
(or any options or warrants issued by such Person with respect to its capital
stock or any partnership interests), or set aside any funds for any of the
foregoing purposes, or shall
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have permitted any of its Subsidiaries to purchase or otherwise acquire for a
consideration any shares of any class of the capital stock or any partnership
interests of such Person outstanding on or after the Effective Date (or any
options or warrants issued by such Person with respect to its capital stock).
Without limiting the foregoing, "Distributions" with respect to any Person shall
also include all payments made or required to be made by such Person with
respect to any stock appreciation rights, plans, equity incentive or achievement
plans or any similar plans or setting aside of any funds for the foregoing
purposes.
"Documents" shall mean the Credit Documents, the Existing Senior
Secured Notes Tender Offer/Consent Solicitation Documents, the Existing PIK
Preferred Stock Redemption Documents and the New Senior Subordinated Notes
Documents.
"Dollar Equivalent" of an amount denominated in a currency other
than Dollars (the "Other Currency") shall mean, at any time for the
determination thereof, the amount of Dollars which could be purchased with the
amount of Other Currency involved in such computation at the spot exchange rate
therefor as quoted by the Administrative Agent as of 11:00 A.M. (New York time)
on the date two Business Days prior to the date of any determination thereof for
purchase on such date; provided that the Dollar Equivalent of any Unpaid Drawing
in a currency other than Dollars shall be determined at the time the drawing
under the related Letter of Credit was paid or disbursed by the Issuing Bank;
provided further, that for purposes of (x) determining compliance with Sections
1.01(f), 1.01(g), 2.02(a) and 4.01(a) and (y) calculating Term Loan Commitment
Commission pursuant to Section 3.01(a), Revolving Loan Commitment Commission
pursuant to Section 3.01(b), Letter of Credit Fees pursuant to Section 3.01(c)
and Facing Fees pursuant to Section 3.03(d), the Dollar Equivalent of any
portion of the Total Term Loan Commitment or the Revolving Loan Commitment
denominated in Deutsche Marks and the Stated Amount of any outstanding Letters
of Credit and any Unpaid Drawings, in each case denominated in a currency other
than Dollars, shall be revalued on a quarterly basis using the spot exchange
rate therefor quoted in the Wall Street Journal on the last Business Day of each
calendar quarter, provided, however, that the Administrative Agent may revalue
the Dollar Equivalent of any such amounts described in the second proviso of
this definition at any time at its sole discretion or at the direction of the
Required Lenders.
"Dollar Loan" shall mean each U.S. Borrower Tranche A Term Loan,
each Delayed Draw Term Loan, each Tranche B Term Loan, each Tranche C Term Loan,
each Dollar Revolving Loan and each Swingline Loan.
"Dollar Revolving Loan" shall have the meaning provided in Section
1.01(f).
"Dollar Revolving Note" shall have the meaning provided in Section
1.05(a).
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"Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States.
"Domestic Subsidiary" shall mean each Subsidiary of the U.S.
Borrower incorporated or organized in the United States or any State or
territory thereof.
"Drawing" shall have the meaning provided in Section 2.05(b).
"Effective Date" shall have the meaning provided in Section 13.10.
"Eligible Inventory" shall mean German Eligible Inventory or U.S.
Eligible Inventory, as the case may be.
"Eligible Receivables" shall mean German Eligible Receivables or
U.S. Eligible Receivables, as the case may be.
"Eligible Transferee" shall mean and include a commercial bank,
financial institution, any fund that invests in bank loans and any other
"accredited investor" (as defined in Regulation D of the Securities Act), in
each case which Person shall not have been denied an approval or a license, or
found unsuitable under the Applicable Gaming Regulations (including, without
limitation, Nevada Gaming Regulations) applicable to lenders, shall not have
been found unsuitable by the Mississippi Gaming Commission and which meets the
requirements of all other jurisdictions relating to the Gaming Business of the
U.S. Borrower and its Subsidiaries to the extent that the U.S. Borrower has so
notified the Banks of such requirements of such other jurisdiction pursuant to
Section 13.04(e).
"Environmental Claims" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, directives,
claims, liens, notices of non-compliance or violation, investigations or
proceedings arising under any Environmental Law or any permit issued, or any
approval given, under any such Environmental Law (hereafter, "Claims"),
including, without limitation, (a) any and all Claims by governmental or
regulatory authorities for enforcement, cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable Environmental Law, and (b)
any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief in connection
with alleged injury or threat of injury to human health, safety or the
environment due to the presence of Hazardous Materials.
"Environmental Law" shall mean any Federal, state, foreign or
local statute, law, rule, regulation, ordinance, code, guideline, written policy
and rule of common law now or hereafter in effect and in each case as amended,
and any judicial or administrative interpretation thereof, including any
judicial or administrative order, con-
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sent decree or judgment, relating to the environment, employee health and safety
or Hazardous Materials, including, without limitation, CERCLA; RCRA; the Federal
Water Pollution Control Act, 33 U.S.C. Section 1251 et seq.; the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et seq.; the Clean Air Act, 42
U.S.C. Section 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 3803
et seq.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq.; the
Emergency Planning and the Community Right-to-Know Act of 1986, 42 U.S.C.
Section 11001 et seq.; the Hazardous Material Transportation Act, 49 U.S.C.
Section 1801 et seq. and the Occupational Safety and Health Act, 29 U.S.C.
Section 651 et seq.; and any state and local or foreign counterparts or
equivalents, in each case as amended from time to time.
"Environmental Matters" shall have the meaning provided in Section
8.01(i).
"Equity Interests" means capital stock or general partnership or
limited partnership interests and all warrants, options or other rights to
acquire capital stock or such interests (but excluding any debt security that is
convertible into, or exchangeable for, capital stock or such interests).
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder. Section references to ERISA are to ERISA, as in effect at the
date of this Agreement and any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section
3(9) of ERISA) which together with the U.S. Borrower or a Subsidiary of the U.S.
Borrower would be deemed to be a "single employer" within the meaning of Section
414(b), (c), (m) or (o) of the Code.
"Euro Rate" shall mean and include each of the Eurodollar Rate and
the Deutsche Mark Euro Rate.
"Euro Rate Loan" shall mean each Eurodollar Loan and each Deutsche
Mark Loan.
"Eurodollar Loan" shall mean each Dollar Loan designated as such
by the U.S. Borrower at the time of the incurrence thereof or conversion
thereto.
"Eurodollar Rate" shall mean (a) for any Interest Period, the rate
per annum determined by the Administrative Agent at approximately 11:00 a.m.
(London time) on the date which is two Business Days prior to the beginning of
the relevant Interest Period (as specified in the applicable Notice of Borrowing
or Notice of
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Conversion) by reference to the "British Bankers' Association Interest
Settlement Rates" for deposits in Dollars (as set forth by any service selected
by the Administrative Agent which has been nominated by the British Bankers'
Association 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 rate to be used for purposes of this clause
(a) shall be the interest rate per annum determined by the Administrative Agent
to be the rate per annum at which deposits in Dollars are offered for such
relevant Interest Period to major banks in the London interbank market in
London, England by CSFB at approximately 11:00 a.m. (London time) on the date
which is two Business Days prior to the beginning of such Interest Period,
divided (and rounded, if necessary, upward to the nearest whole multiple of 1/16
of 1%) by (b) a percentage equal to 100% minus the then stated maximum rate of
all reserve requirements (including, without limitation, any marginal,
emergency, supplemental, special or other reserve required by applicable law)
applicable to any member bank of the Federal Reserve System in respect of
Eurocurrency funding or liabilities as defined in Regulation D (or any successor
category of liabilities under Regulation D).
"Event of Default" shall have the meaning provided in Section 10.
"Excess Cash Flow" shall mean, for any period, the remainder of
(i) the sum of (a) Adjusted Consolidated Net Income for such period and (b) the
decrease, if any, in Adjusted Consolidated Working Capital from the first day to
the last day of such period, minus (ii) the sum of (a) the amount of Capital
Expenditures (but excluding Capital Expenditures (x) financed with Indebtedness
(other than proceeds of Revolving Loans) or equity proceeds or (y) made pursuant
to Section 9.07(c)(i), (ii) or (iv)) made by the U.S. Borrower and its
Subsidiaries during such period in accordance with Section 9.07, (b) the
aggregate amount of permanent principal payments of Indebtedness for borrowed
money of the U.S. Borrower and its Subsidiaries (excluding payments pursuant to
the Transaction, payments of Indebtedness with proceeds of refinancing
Indebtedness or proceeds of Asset Sales and excluding repayments of Loans,
provided that repayments of Loans shall be deducted in determining Excess Cash
Flow if such repayments were (x) required as a result of a Scheduled Repayment
under Section 4.02(b) or (y) made as a voluntary prepayment by the Borrowers
with internally generated funds (but in the case of a voluntary prepayment of
Revolving Loans, only to the extent accompanied by a voluntary reduction to the
Total Revolving Loan Commitment)) during such period, (c) the amount of cash
Investments made during such period pursuant to clauses (x) (but only to the
extent constituting a usage of the $4,000,000 permitted to be used to repurchase
minority equity issuances in RCVP), (xi), (xii), (xiii), (xiv), (xv) and (xx) of
Section 9.05 during such period, reduced by the amount of all reductions to such
Investments during such period as a result of the provisions of the penultimate
sentence of Section 9.05, and (d) the increase, if any, in Adjusted Consolidated
Working Capital from the first day to the last day of such period.
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"Excess Cash Payment Date" shall mean the date occurring 90 days
after the last day of each fiscal year of Holdings ended after the Initial
Borrowing Date.
"Excess Cash Payment Period" shall mean, with respect to the
repayment required on each Excess Cash Payment Date, the immediately preceding
fiscal year of the U.S. Borrower.
"Exempt Affiliate Transaction" means (i) any extension or renewal,
in accordance with their terms, of those certain Employment Agreements dated as
of July 1, 1997 between the U.S. Borrower and each of Anthony L. DiCesare, Joel
Kirschbaum and Stephen C. Perry (collectively, the "Employment Agreements") and
that certain letter agreement dated July 1, 1997 between the U.S. Borrower and
Kirkland Investment Corporation providing for the payment of overhead expenses,
as well as any restructuring of the Employment Agreements, provided in the case
of a restructuring of any Employment Agreement, that the board of directors of
the U.S. Borrower has determined that the restructured terms are fair to the
U.S. Borrower and if the restructuring involves aggregate consideration in
excess of $10,000,000, the U.S. Borrower delivers a fairness opinion of the type
specified in Section 9.06 and (ii) any agreements between U.S. Borrower and Mr.
Wilms or any of his Affiliates providing for the payment by the U.S. Borrower of
consulting fees or similar fees in an aggregate amount not to exceed $500,000
per annum.
"Existing Credit Agreements" shall mean (i) the Credit Agreement
among Bally Wulff Vertriebs, Bally Wulff Automaten and Berliner Bank AG dated as
of January 22, 1997, (ii) the Credit Agreement among Bally Wulff Vertriebs,
Bally Wulff Automaten, certain other debtors and Berliner Bank dated as of March
3, 1993, (iii) the Credit Agreement among Bally Wulff Automaten and Dresdner
Bank, (iv) the Guaranty Credit Agreement among Bally Wulff Vertriebs, Bally
Wulff Automaten and Berliner Bank dated as of December 20, 1994 and (iv) the
Loan and Security Agreement between Congress Financial Corporation (Western) and
Bally Gaming, Inc. dated March 31, 1997.
"Existing Indebtedness" shall have the meaning provided in Section
7.22.
"Existing PIK Preferred Stock" shall mean the U.S. Borrower's 15%
Non-Voting Senior Special Stock, Series B.
"Existing PIK Preferred Stock Documents" shall mean the
certificate of designation with respect to the Existing PIK Preferred Stock and
all other documents relating thereto.
"Existing PIK Preferred Stock Redemption Documents" shall mean the
notice of redemption of the Existing PIK Preferred Stock plus any other
documents or
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agreements entered into in connection with the redemption of the Existing PIK
Preferred Stock.
"Existing Senior Secured Notes" shall mean the $154,000,000
aggregate principal amount of the U.S. Borrower's 12-7/8% Senior Secured Notes
due 2003 which were issued pursuant to the Existing Senior Secured Notes
Indenture.
"Existing Senior Secured Notes Collateral Documents" shall mean
all documents securing, or creating Liens to secure, the Existing Senior Secured
Notes from time to time outstanding.
"Existing Senior Secured Notes Collateral Documents Amendments"
shall mean the amendments to the Existing Senior Secured Notes Collateral
Documents in the form contemplated by the Existing Senior Secured Notes Tender
Offer/Consent, Solicitation Documents and entered into by the parties to the
respective Existing Senior Secured Notes Collateral Documents in connection with
the Existing Senior Secured Notes Tender Offer/Consent Solicitation.
"Existing Senior Secured Notes Documents" shall mean the Existing
Senior Secured Notes Indenture, the Existing Senior Secured Notes Indenture
Supplement, the Existing Senior Secured Notes, the Existing Senior Secured Notes
Collateral Documents, the Existing Senior Secured Notes Collateral Documents
Amendments and each of the other agreements and documents entered into in
connection therewith.
"Existing Senior Secured Notes Indenture" shall mean the
Indenture, dated as of June 18, 1996, among the U.S. Borrower, as issuer,
certain Guarantors (as defined therein) and United States Trust Company of New
York, as trustee (as amended, modified or supplemented from time to time,
including pursuant to the Existing Senior Secured Notes Indenture Supplement, in
accordance with the terms of this Agreement).
"Existing Senior Secured Notes Indenture Supplement" shall mean
the First Supplemental Indenture to the Existing Senior Secured Notes Indenture
in the form delivered to the Administrative Agent pursuant to Section 5A.06 and
entered into by the U.S. Borrower and the trustee for the Existing Senior
Secured Notes in connection with the Existing Senior Secured Notes Tender
Offer/Consent Solicitation.
"Existing Senior Secured Notes Reduction Amount" shall have the
meaning provided in Section 3.03(h).
"Existing Senior Secured Notes Tender Offer/Consent Solicitation"
shall have the meaning provided in Section 5A.06.
"Existing Senior Secured Notes Tender Offer/Consent Solicitation
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Documents" shall mean the Existing Senior Secured Notes Tender Offer/Consent
Solicitation, the Existing Senior Secured Notes Indenture Supplement and each of
the other agreements and documents entered into in connection with the Existing
Senior Subordinated Notes Tender Offer/Consent Solicitation.
"Existing Senior Secured Notes Tender Offer Repurchases" shall
have the meaning provided in Section 5A.06.
"Facing Fee" shall have the meaning provided in Section 3.01(d).
"Federal Funds Rate" shall mean for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal Funds
brokers of recognized standing selected by the Administrative Agent.
"Fees" shall mean all amounts payable pursuant to or referred to
in Section 3.01.
"First-Step" shall have the meaning provided in the definition of
Two- Step Permitted Acquisition.
"Foreign Pension Plan" shall mean any plan, fund (including,
without limitation, any superannuation fund) or other similar program
established or maintained outside the United States of America by the U.S.
Borrower or any one or more of its Subsidiaries primarily for the benefit of
employees of the U.S. Borrower or such Subsidiaries residing outside the United
States of America, which plan, fund or other similar program provides, or
results in, retirement income, a deferral of income in contemplation of
retirement or payments to be made upon termination of employment, and which plan
is not subject to ERISA or the Code.
"Foreign Subsidiaries Guaranty" shall mean and include the German
Subsidiaries Guaranty and each Additional Guaranty delivered by a Foreign
Subsidiary pursuant to Section 8.11, 8.12, 8.14 or 9.16.
"Foreign Subsidiary" shall mean each Subsidiary of the U.S.
Borrower other than a Domestic Subsidiary.
"Former Lender" shall have the meaning provided in Section
13.04(c).
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"GAAP" shall mean generally accepted accounting principles in the
United States consistently applied throughout the periods involved.
"Gaming Authority" shall mean the governmental authorities charged
with the administration and enforcement of the Gaming Regulations.
"Gaming Business" means the business conducted by the U.S.
Borrower and its Subsidiaries as of the Effective Date, including the management
and operation of gaming machines and casinos, the design, manufacture and
distribution of gaming machines, equipment, monitoring systems and amusement
equipment, and other gaming-related businesses, including but not limited to
amusements, arcades, Internet-based gaming, pari-mutuel and lottery-related
activities, and any and all businesses that in the good faith judgment of the
board of directors of the U.S. Borrower are materially related businesses.
"Gaming License" means every license, permit, registration,
finding of suitability, franchise, approval or other authorization required to
own, lease, operate or otherwise conduct or manage riverboat, dockside or
land-based gaming (including any applicable liquor licenses) or to design,
manufacture or distribute gaming machines, equipment or systems, or to conduct
any Gaming Business, in any state or jurisdiction where the U.S. Borrower or any
of its Subsidiaries conduct such business.
"Gaming Regulations" shall mean the laws, rules, regulations,
ordinances and orders applicable to the casino and Gaming Business or activities
of U.S. Borrower or any of its Subsidiaries, as in effect from time to time,
including the policies, interpretations and administration thereof by the Gaming
Authorities.
"German Borrower" shall mean each of Bally Wulff Vertriebs and
Bally Wulff Automaten, as joint and several obligors hereunder.
"German Borrower Tranche A Scheduled Repayment" shall have the
meaning provided in Section 4.02(b)(ii).
"German Borrower Tranche A Scheduled Repayment Date" shall have
the meaning provided in Section 4.02(b)(ii).
"German Borrower Tranche A Term Loan" shall have the meaning
provided in Section 1.01(b).
"German Borrower Tranche A Term Loan Commitment" shall mean, for
each Lender, the amount set forth opposite such Lender's name in Schedule I-A
directly below the column entitled "German Borrower Tranche A Term Loan
Commitment", as the same may be (x) reduced from time to time pursuant to
Sections 3.03, 4.02 and/or 10
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or (y) adjusted from time to time as a result of assignments to or from such
Lender pursuant to Section 1.13 or 13.04(b).
"German Borrower Tranche A Term Note" shall have the meaning
provided in Section 1.05(a).
"German Borrowing Base" shall mean, as of any date of which the
amount thereof is being determined, an amount (expressed in Deutsche Marks)
equal to the sum of (i) 75% of German Eligible Receivables and (ii) 40% of
German Eligible Inventory, each as determined for the Borrowing Base Certificate
most recently delivered by the German Borrowers pursuant to Section 8.01(j).
"German Eligible Inventory" shall mean the book value of the
inventory of the German Borrowers and Bally Gaming International GmbH, so long
as Bally Gaming International GmbH is a Wholly-Owned Subsidiary of Bally Wulff
Vertriebs and is party to a German Subsidiaries Guaranty and German Security
Agreement, which conforms to the representations and warranties contained in the
German Security Agreement which inventory is located in the Republic of Germany,
less (i) any supplies (other than raw materials), goods returned or rejected
(except to the extent that such returned or rejected goods continue to conform
to the representations and warranties contained in the German Security
Agreement) by customers and goods returned to suppliers, (ii) all used equipment
otherwise reflected in such inventory, (iii) any advance payments made by
customers with respect to inventory of the German Borrowers or Bally Gaming
International GmbH and (iv) inventory subject to any Lien other than Liens
created under the German Security Agreement. Notwithstanding anything to the
contrary contained above, German Eligible Inventory of Bally Gaming
International GmbH shall be included as otherwise provided above only to the
extent same secures Bally Gaming International GmbH Senior Secured Loans which
are then outstanding; provided that the amount of German Eligible Inventory and
German Eligible Receivables of Bally Gaming International GmbH at any time
included in the German Borrowing Base (i.e., after reducing same by the
percentages specified in the definition of German Borrowing Base) shall at no
time exceed the lesser of (x) $10,000,000 (or the Deutsche Mark Equivalent
thereof) or (y) the aggregate principal amount of Bally Gaming International
GmbH Senior Secured Loans then outstanding.
"German Eligible Receivables" shall mean the gross book value of
the receivables of the German Borrowers and Bally Gaming International GmbH, so
long as Bally Gaming International GmbH is a Wholly-Owned Subsidiary of Bally
Wulff Vertriebs and is party to a German Subsidiaries Guaranty and German
Security Agreement arising from the sale or lease of inventory or services by
such Persons in the ordinary course of business which conform to the
representations and warranties contained in the German Security Agreement
(including, without limitation, that the Collateral Agent shall have and
maintain a first priority perfected security interest in all such receivables)
less any returns and claims of any nature (whether issued, owing, granted or
outstanding) and
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excluding (i) bill and hold (deferred shipment) and consignment transactions,
(ii) contracts or sales to any Affiliate, (iii) all installment or lease
receivables where the respective account debtor has two or more installments
which are past due, (iv) all receivables from any party subject to any
bankruptcy, receivership insolvency or like proceedings by the account debtor,
and (v) excluding one-third of the amount of all receivables to account debtors
outside the Federal Republic of Germany which would otherwise have been included
as German Eligible Receivables. Notwithstanding anything to the contrary
contained above, (x) to the extent that the book reserves in respect of
receivables of the German Borrowers or Bally Gaming International GmbH, as the
case may be, would exceed 20% of the gross book value of the receivables of such
Person or Persons on its financial statements as prepared in accordance with
GAAP, the amount of such excess reserves shall apply to reduce the amount of
German Eligible Receivables and (y) German Eligible Receivables of Bally Gaming
International GmbH shall be included as otherwise provided above only to the
extent same secures Bally Gaming International GmbH Senior Secured Loans which
are then outstanding; provided that the amount of German Eligible Inventory and
German Eligible Receivables of Bally Gaming International GmbH at any time
included in the German Borrowing Base (i.e., after reducing same by the
percentages specified in the definition of German Borrowing Base) shall at no
time exceed the lesser of (x) $10,000,000 (or the Deutsche Mark Equivalent
thereof) or (y) the aggregate principal amount of Bally Gaming International
GmbH Senior Secured Loans then outstanding.
"German Leasing Joint Venture" shall mean any Person, which is not
a Subsidiary of the U.S. Borrower, but in which the German Parent or one or more
of its Subsidiaries makes Investments, which is established for the same purpose
described in the definition of German Leasing Subsidiary.
"German Leasing Subsidiary" shall mean a German Subsidiary formed
for the special purpose of acquiring gaming equipment and leasing the same to
customers in the ordinary course of business, and obtaining third-party
financing for the gaming equipment so acquired; provided that no German Leasing
Subsidiary shall engage in any business other than as contemplated by the
immediately preceding sentence.
"German Letter of Credit" shall mean each Letter of Credit issued
for the joint and several account of the German Borrowers pursuant to Section
2.01.
"German Letter of Credit Outstandings" shall mean, at any time,
the sum of (i) the aggregate Stated Amount of all outstanding German Letters of
Credit and (ii) the amount of all Unpaid Drawings with respect to German Letters
of Credit.
"German Parent" shall mean Alliance Automaten GmbH & Co. KG (and
its successors).
"German Pledge Agreement" shall have the meaning provided in
Section
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5A.15.
"German Pledge Documents" shall have the meaning provided in
Section 5A.15.
"German RL Percentage" of any German Revolving Lender at any time
shall mean a fraction (expressed as a percentage) the numerator of which is the
German Revolving Loan Sub-Commitment of such German Revolving Lender at such
time and the denominator of which is the aggregate amount of German Revolving
Loan Sub- Commitments of all German Revolving Lenders at such time, provided
that if the German RL Percentage of any German Revolving Lender is to be
determined after the Total Revolving Loan Commitment has been terminated, then
the German RL Percentages of the German Revolving Lenders shall be determined
immediately prior (and without giving effect) to such termination.
"German Revolving Lender" means (i) each Person listed on Schedule
I-B, and (ii) each additional Person that becomes a German Revolving Lender
party hereto in accordance with Section 1.13 and/or 13.04. A German Revolving
Lender shall cease to be a "German Revolving Lender" when it has assigned all of
its German Revolving Loan Sub-Commitments in accordance with Section 1.13 and/or
13.04. For purposes of this Agreement, "Lender" includes each German Revolving
Lender unless the context otherwise requires.
"German Revolving Loan Sub-Commitment" means, as to any German
Revolving Lender, (i) the amount set forth opposite such German Revolving
Lender's name in Schedule I-B directly below the column entitled "German
Revolving Loan Sub- Commitment", as same may be (x) reduced from time to time
pursuant to Section 3.02, 3.03 and/or 10 or (y) adjusted from time to time as a
result of assignments to or from such Lender pursuant to Section 1.13 or
13.04(b). The German Revolving Loan Sub-Commitment of each German Revolving
Lender is a sub-limit of the Revolving Loan Commitment of the respective German
Revolving Lender (or its respective Affiliate which is a Lender with the related
Revolving Loan Commitment) and not an additional commitment and, in no event,
may exceed at any time the amount of the Revolving Loan Commitment of such
German Revolving Lender (or its respective Affiliate which is a Lender with the
related Revolving Loan Commitment).
"German Security Agreement" shall have the meaning provided in
Section 5A.15.
"German Security Documents" shall mean the German Security
Agreement, each German Pledge Document and, after the execution and delivery
thereof, each Additional Security Document executed and delivered by any
Subsidiary of the U.S. Borrower incorporated or organized under the laws of
Germany.
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"German Subsidiaries Guaranty" shall have the meaning provided in
Section 5A.12.
"German Subsidiary" shall mean each Subsidiary of the U.S.
Borrower incorporated or organized under the laws of the Federal Republic of
Germany.
"German Subsidiary Guarantors" shall mean each German Subsidiary
of the U.S. Borrower which has executed and delivered the German Subsidiaries
Guaranty.
"Guaranteed Creditors" shall mean and include each of the Agent,
the Collateral Agent, the Lenders and each party (other than any Credit Party)
party to an Interest Rate Protection Agreement or Other Hedging Agreement to the
extent that the obligations under such Interest Rate Protection Agreement or
Other Hedging Agreement constitute Guaranteed Obligations.
"Guaranteed Obligations" shall mean (i) the principal and interest
on each Note issued by the German Borrowers to each Lender, and Loans made to
the German Borrowers under this Agreement and all reimbursement obligations and
Unpaid Drawings with respect to German Letters of Credit, together with all the
other obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities
(including, without limitation, indemnities, fees and interest thereon) of the
German Borrowers to such Lender, the Agent and the Collateral Agent now existing
or hereafter incurred under, arising out of or in connection with this Agreement
or any other Credit Document and the due performance and compliance with all the
terms, conditions and agreements contained in the Credit Documents by the German
Borrowers and (ii) all obligations (including obligations which, but for the
automatic stay under Section 362(a) of the Bankruptcy Code, would become due)
and liabilities of the German Borrowers or any of their respective Subsidiaries
owing under any Interest Rate Protection Agreement or Other Hedging Agreement
entered into by any German Borrower or any of their respective Subsidiaries with
any Lender or any affiliate thereof (even if such Lender subsequently ceases to
be a Lender under this Agreement for any reason) so long as such Lender or
affiliate participate in such Interest Rate Protection Agreement or Other
Hedging Agreement, and their subsequent assigns, if any, whether now in
existence or hereafter arising, and the due performance and compliance with all
terms, conditions and agreements contained therein.
"Guaranteed Party" shall mean each German Borrower.
"Guaranty" shall mean and include each of the Parent Guaranty, the
U.S. Subsidiaries Guaranty, the German Subsidiaries Guaranty and each additional
guaranty delivered pursuant to Section 8.11, 8.12, 8.14 and/or 9.16.
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"Hazardous Materials" means (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is friable, urea
formaldehyde foam insulation, transformers or other equipment that contain
dielectric fluid containing levels of polychlorinated biphenyls, and radon gas;
(b) any chemicals, materials or substances defined as or included in the
definition of "hazardous substances," "hazardous waste," "hazardous materials,"
"extremely hazardous substances," "restricted hazardous waste," "toxic
substances," "toxic pollutants," "contaminants," or "pollutants," or words of
similar import, which are regulated under any applicable Environmental Law; and
(c) any other chemical, material or substance, the Release of which is
prohibited, limited or regulated by any governmental authority.
"Indebtedness" shall mean, as to any Person, without duplication,
(i) all indebtedness (including principal, interest, fees and charges) of such
Person for borrowed money or for the deferred purchase price of property or
services (excluding accounts payable and accrued expenses arising in the
ordinary course of business), (ii) the maximum amount available to be drawn
under all letters of credit issued for the account of such Person and all unpaid
drawings in respect of such letters of credit, (iii) all Indebtedness of the
types described in clause (i), (ii), (iv), (v), (vi) or (vii) of this definition
secured by any Lien on any property owned by such Person, whether or not such
Indebtedness has been assumed by such Person (provided, that, if the Person has
not assumed or otherwise become liable in respect of such Indebtedness, such
Indebtedness shall be deemed to be in an amount equal to the fair market value
of the property to which such Lien relates as determined in good faith by such
Person), (iv) the aggregate amount required to be capitalized under leases under
which such Person is the lessee, (v) all obligations of such person to pay a
specified purchase price for goods or services, whether or not delivered or
accepted, i.e., take-or-pay and similar obligations, (vi) all Contingent
Obligations of such Person and (vii) all obligations under any Interest Rate
Protection Agreement, any Other Hedging Agreement or under any similar type of
agreement.
"Indebtedness to be Refinanced" shall mean collectively, the
indebtedness, rising pursuant to the Existing Credit Agreements.
"Independent Subsidiary" shall mean each Subsidiary of the U.S.
Borrower wherein no Equity Interests are held, directly or indirectly (except as
a result of ownership interests in the U.S. Borrower) by any Person (other than
another Subsidiary of the U.S. Borrower) which is an Affiliate of the U.S.
Borrower.
"Initial Borrowing Date" shall mean the date occurring on or after
the Effective Date on which the initial Borrowing of Loans hereunder occurs.
"Initial Delayed Draw Term Loan Borrowing Date" shall have the
meaning provided in Section 5B.01.
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"Insignificant Subsidiary" shall mean any Subsidiary of the U.S.
Borrower (excluding the German Parent and the German Borrowers) which has assets
of not greater than $2,500,000 in the aggregate and which, if aggregated with
all other Subsidiaries of the Borrower with respect to which an event described
in Section 10.05 has occurred and is continuing, would have assets of not
greater than $2,500,000.
"Interest Determination Date" shall mean, (x) with respect to any
Eurodollar Loan, the second Business Day prior to the commencement of any
Interest Period relating to such Eurodollar Loan and (y) with respect to any
Deutsche Mark Loan, the second Business Day prior to the commencement of any
Interest Period relating to such Deutsche Mark Loan.
"Interest Period" shall have the meaning provided in Section 1.09.
"Interest Rate Protection Agreement" shall mean any interest rate
swap agreement, interest rate cap agreement, interest collar agreement, interest
rate hedging agreement or other similar agreement or arrangement.
"Investments" shall have the meaning provided in Section 9.05.
"Issuing Bank" shall mean CSFB and any other Lender which at the
request of the Account Parties (or the respective Account Party) and with the
consent of the Administrative Agent agrees, in such Lender's sole discretion, to
become an Issuing Bank for the purpose of issuing Letters of Credit pursuant to
Section 2. The sole Issuing Bank on the Initial Borrowing Date is CSFB.
"Judgment Currency" shall have the meaning provided in Section
13.16(a).
"Judgment Currency Conversion Date" shall have the meaning
provided in Section 13.16(a).
"Knowledgeable Officer" shall mean with respect to any Borrower,
the chief financial officer and chief executive officer of such Borrower, the
treasurer, controller and any other financial officer of such Borrower, and the
general counsel or any assistant general counsel of such Borrower; provided to
the extent the matter relates to environmental matters, a Knowledgeable Officer
shall also include any environmental officer of the respective Borrower and any
other officer with responsibility for environmental matters.
"L/C Supportable Obligations" of each Account Party shall mean
obligations of such Account Party or any of its (or their) Subsidiaries incurred
in the ordinary course of business and which do not violate the applicable
provisions, if any, of this Agreement.
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"Leaseholds" of any Person means all the right, title and interest
of such Person as lessee or licensee in, to and under leases or licenses of
land, improvements and/or fixtures.
"Lender" shall mean each financial institution listed on Schedule
I, as well as any Person which becomes a "Lender" hereunder pursuant to Section
1.13 or 13.04(b). Unless the context otherwise requires, each reference in this
Agreement to a Lender includes each German Revolving Lender and, if the
reference is to a specific Lender which has a Revolving Loan Commitment
hereunder, shall include references to any Affiliate of any such Lender which is
acting as a German Revolving Lender.
"Lender Default" shall mean (i) the refusal (which has not been
retracted) or the failure of a Lender to make available its portion of any
Borrowing (including any Mandatory Borrowing) or to fund its portion of any
unreimbursed payment under Section 2.04(c) or (ii) a Lender having notified in
writing any Borrower and/or the Administrative Agent that such Lender does not
intend to comply with its obligations under Section 1.01 or 2.
"Letter of Credit" shall have the meaning provided in Section
2.01(a).
"Letter of Credit Fee" shall have the meaning provided in Section
3.01(c).
"Letter of Credit Outstandings" shall mean, at any time, the sum
of (i) the aggregate Stated Amount of all outstanding Letters of Credit and (ii)
the amount of all Unpaid Drawings.
"Letter of Credit Request" shall have the meaning provided in
Section 2.03(a).
"Leverage Ratio" shall mean, at any time, the ratio of
Consolidated Indebtedness at such time to Consolidated EBITDA for the then most
recently ended Test Period; provided that to the extent any Permitted
Acquisition, any discontinuance of operations or any Assets Sale (or any similar
material transaction which requires a waiver or a consent of the Required
Lenders pursuant to Section 9.02) has occurred during the relevant Test Period,
Consolidated EBITDA shall be determined for the respective Test Period on a Pro
Forma Basis.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), preference,
priority or other security agreement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the UCC or
any other similar recording or notice statute, and any lease
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having substantially the same effect as any of the foregoing).
"Loan" shall mean each U.S. Borrower Tranche A Term Loan, each
German Borrower Tranche A Term Loan, each Delayed Draw Term Loan, each Tranche B
Term Loan, each Tranche C Term Loan, each Revolving Loan and each Swingline
Loan.
"Longer Maturity Term Loans" shall have the meaning provided in
Section 4.05.
"LVI" shall mean Louisiana Ventures, Inc., a Nevada corporation
which is a Wholly-Owned Subsidiary of the U.S. Borrower.
"Majority Lenders" of any Tranche shall mean those Non-Defaulting
Lenders which would constitute the Required Lenders under, and as defined in,
this Agreement if all outstanding Obligations of the other Tranches under this
Agreement were repaid in full and all Commitments with respect thereto were
terminated.
"Mandatory Borrowing" shall have the meaning provided in Section
1.01(h).
"Margin Adjustment Period" shall mean each period which shall
commence on the date occurring after the Effective Date on which the respective
officer's certificate is delivered pursuant to Section 8.01(f) (or, in the case
of Margin Adjustment Periods beginning after the initial such Margin Adjustment
Period, which shall begin on the last day of the Margin Adjustment Period then
ending) and which shall end on the earlier of (i) the date of actual delivery of
the next officer's certificate pursuant to Section 8.01(f) and (ii) the latest
date on which the next officer's certificate is required to be delivered.
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Adverse Effect" shall mean any material adverse effect
on the business, operations, property, assets, liabilities, condition (financial
or otherwise) or prospects of the U.S. Borrower and its Subsidiaries taken as a
whole.
"Maturity Date" shall mean, with respect to any Tranche of Loans,
the Tranche A Term Loan Maturity Date, Delayed Draw Term Loan Maturity Date, the
Tranche B Term Loan Maturity Date, the Tranche C Term Loan Maturity Date or the
Revolving Loan Maturity Date, as the case may be.
"Maximum Swingline Amount" shall mean $10,000,000.
"Minimum Borrowing Amount" shall mean, for each Type and Tranche
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of Loans hereunder, the respective amount specified below:
(i) in the case of a Borrowing of Euro Rate Loans of any Tranche
$2,000,000 (or the Deutsche Mark Equivalent thereof in the case of a
Borrowing of Deutsche Mark Loans);
(ii) in the case of a Borrowing (but excluding Borrowings of
Swingline Loans) of Base Rate Loans of any Tranche, $1,000,000; and
(iii) in the case of a Borrowing of Swingline Loans, $100,000.
"Missouri Equity Pledge Restriction" shall have the meaning
provided in Section 13.18(b).
"Missouri License Subsidiary" shall have the meaning provided in
Section 13.18(b).
"Mortgage" shall have the meaning provided in Section 5A.16.
"Mortgage Policy" shall have the meaning provided in Section
5A.16.
"Mortgaged Property" shall have the meaning provided in Section
5A.16.
"Net Income" means, with respect to any Person for any period, the
net income (loss) of such Person, determined in accordance with GAAP and before
any reduction in respect of Preferred Stock dividends, excluding (without
duplication), however, (i) any gain or loss together with any related provision
for taxes on such gain or loss realized in connection with (a) any Asset Sale
(including, without limitation, dispositions pursuant to Sale and Leaseback
Transactions) or (b) the disposition of any securities by such Person or any of
its Subsidiaries or the extinguishment of any Indebtedness of such Person or any
of its Subsidiaries, (ii) any extraordinary gain or loss, together with any
related provision for taxes on such extraordinary gain or loss, and (iii)
prepayment premiums and other charges incurred in connection with the
Refinancing and any gains or losses directly related to the consummation of the
Transaction.
"Net Sale Proceeds" shall mean for any sale of assets, the gross
cash proceeds (including any cash received by way of deferred payment pursuant
to a promissory note, receivable or otherwise, but only as and when received)
received from such sale of assets, net of (a) cash expenses of sale (including,
without limitation, brokerage fees, if any, transfer taxes and payment of
principal, premium and interest of Indebtedness other than the Loans required to
be repaid as a result of such asset sale) and (b) all foreign, federal, state
and local taxes to the extent payable as a direct consequence of any such asset
sale.
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"Nevada Gaming Regulations" shall mean the Nevada Gaming Control
Act, as codified in Chapter 463 of the Nevada Revised Statutes, as amended from
time to time, and the regulations of the Nevada Gaming Commission promulgated
thereunder, as amended from time to time.
"New Senior Subordinated Note Indenture" shall mean the Indenture,
dated as of August 8, 1997, among the U.S. Borrower, certain of its Subsidiaries
and United States Trust Company of New York, as trustee thereunder, as in effect
on the Effective Date and as the same may be modified, amended or supplemented
from time to time in accordance with the terms hereof and thereof.
"New Senior Subordinated Notes" shall mean the Borrower's 10%
Senior Subordinated Notes due 2007, as in effect on the Effective Date and as
the same may be modified, supplemented or amended from time to time pursuant to
the terms hereof and thereof.
"New Senior Subordinated Notes Documents" shall mean and include
each of the documents and other agreements entered into (including, without
limitation, the New Senior Subordinated Note Indenture) relating to the issuance
by the U.S. Borrower of the New Senior Subordinated Notes, as in effect on the
Effective Date and as the same may be modified, supplemented or amended from
time to time pursuant to the terms hereof and thereof.
"New Senior Subordinated Notes Offering Memorandum" shall mean
the Offering Memorandum, dated August 4, 1997, in connection with the offering
of the New Senior Subordinated Notes.
"Non-Defaulting Lender" shall mean and include each Lender other
than a Defaulting Lender.
"Non-German Revolving Loan Sub-Commitment" means, for any Lender
at any time, such Lender's Revolving Loan Commitment minus, in the case of a
Lender that is, or whose Affiliate is, a German Revolving Lender, such Lender's
or such Affiliate's German Revolving Loan Sub-Commitment.
"Non-Recourse German Leasing Subsidiary Debt" means Indebtedness
(i) as to which neither the U.S. Borrower nor any of its Subsidiaries (other
than one or more German Leasing Subsidiaries) (a) provides credit support of any
kind (including any undertaking, agreement or instrument that would constitute
Indebtedness) or (b) is directly or indirectly liable (as a guarantor, general
partner or otherwise) and (ii) as to which the respective lenders have been
notified in writing that they will not have any recourse to the stock or assets
of the U.S. Borrower or any of its Subsidiaries (other than the respective
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German Leasing Subsidiary or German Leasing Subsidiaries).
"Note" shall mean each U.S. Borrower Tranche A Term Note, each
German Borrower Tranche A Term Note, each Delayed Draw Term Note, each Tranche B
Term Note, each Tranche C Term Note, each Dollar Revolving Note, each Deutsche
Mark Revolving Note and the Swingline Note.
"Notice of Borrowing" shall have the meaning provided in Section
1.03(a).
"Notice of Conversion" shall have the meaning provided in Section
1.06.
"Notice Office" shall mean the office of the Administrative Agent
located at 11 Madison Avenue, New York, New York 10010, Attention: Bruce
MacKenzie, or such other office as the Administrative Agent may hereafter
designate in writing as such to the other parties hereto; provided that in the
case of German Letters of Credit, the "Notice Office" shall mean the office
specified above, with a copy of the respective notice to be delivered at the
same time as otherwise required pursuant to the terms of this Agreement to the
office of the Administrative Agent located at Messefurm 60308, Frankfurt AM,
Main, Germany, attention: Hamad Urf.
"Obligation Currency" shall have the meaning provided in Section
13.16(a).
"Obligations" shall mean all amounts owing to the Administrative
Agent, the Collateral Agent or any Lender pursuant to the terms of this
Agreement or any other Credit Document.
"Other Creditor" shall have the meaning provided in the Security
Documents.
"Other Hedging Agreement" shall mean any foreign exchange
contracts, currency swap agreements, commodity agreements or other similar
agreements or arrangements designed to protect against the fluctuations in
currency values.
"Outstanding A Term Loan Amount" shall have the meaning provided
in Section 4.05.
"Parent Guarantor" shall mean the U.S. Borrower in its capacity as
a Guarantor pursuant to Section 14 of this Agreement.
"Parent Guaranty" shall mean the guaranty of the U.S. Borrower
pursuant to Section 14 of this Agreement.
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"Participant" shall have the meaning provided in Section 2.04(a).
"Payment Office" shall mean (i) in respect of Dollar Loans, U.S.
Letters of Credit, Fees (other than Letter of Credit Fees and Facing Fees with
respect to German Letters of Credit) and, except as provided in clause (ii)
below, all other amounts owing under this Agreement and the other Credit
Documents, the office of the Administrative Agent located at 11 Madison Avenue,
New York, New York 10010, ABA Number: 026009179, Account Name: Alliance Gaming
Clearing Account, Account Number: 931268-31, Attention: Bruce MacKenzie, and
(ii) in the case of Deutsche Mark Loans, German Letters of Credit, the office of
the Administrative Agent located at Messeturm 60308, Frankfurt AM Main, Germany
Credit Suisse First Boston, Aktiengesellschaft Frankfurt, Germany, Swift
address: CRESDEFF, Account Number: 000333361, Reference: Alliance Gaming,
Attention: Client Services or in each case such other office as the
Administrative Agent may hereafter designate in writing as such to the other
parties hereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Permitted Acquisition" shall mean the acquisition (regardless of
form and whether by purchase of assets, purchase of stock, merger, consolidation
or otherwise) by the U.S. Borrower or any of the U.S. Subsidiary Guarantors
which is a Wholly-Owned Subsidiary of the U.S. Borrower of assets constituting a
business or division of any Person or of at least 80% of the Equity Interests of
any Person which Person shall, as a result of such acquisition, become a
Subsidiary of the U.S. Borrower, provided that (A) the consideration paid by the
U.S. Borrower and/or its Subsidiaries consists solely of cash, the issuance of
common stock of the U.S. Borrower and the issuance or assumption, as the case
may be, of Indebtedness permitted in Section 9.04(ix) and/or (xiii), (B) the
assets acquired, or the business of the Person whose stock is acquired, shall be
in the Gaming Business, and (C) in the case of the acquisition of 80% of the
Equity Interests of any Person (the "Acquired Person"), such Acquired Person
shall own no Equity Interests of any other Person unless (x) such Acquired
Person owns at least 80% of the Equity Interests of such other Person or (y) (1)
such Acquired Person and/or its Wholly-Owned Subsidiaries own 80% of the
consolidated assets of such other Person and its Subsidiaries and (2) any
non-Wholly-Owned Subsidiary of such Acquired Person was non-Wholly-Owned prior
to the date of such Permitted Acquisition of such Acquired Person.
Notwithstanding anything to the contrary contained in the immediately preceding
sentence, (x) a Permitted Acquisition of at least 80% of the Equity Interests in
a Person may be effected by means of a two-step transaction, but only so long as
such acquisition is effected by means of a Two-Step Permitted Acquisition
(complying with all requirements of the definition thereof) and, in any event,
all requirements set forth in this definition of Permitted Acquisition shall in
any event be satisfied, except as the requirement of 80% ownership of the Equity
Interests of the Target need not be satisfied until the earlier to
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occur of the consummation of the subsequent merger or compulsory share
acquisition referenced in the definition of Two-Step Permitted Acquisition or
the date which occurs 270 days after the consummation of the first step of the
Two-Step Permitted Acquisition and (y) any acquisition shall be a Permitted
Acquisition only if all requirements of Sections 8.13 and 9.02(ii) applicable to
Permitted Acquisitions are met with respect thereto.
"Permitted Encumbrance" shall mean, with respect to any Mortgaged
Property, such exceptions to title as are set forth in the title insurance
policy or title commitment delivered with respect thereto, all of which
exceptions must be acceptable to the Administrative Agent in its reasonable
discretion.
"Permitted Holders" shall mean Joel Kirschbaum, Koots DiCesare or
Fred Wilms (or any entity controlled by one or more of such individuals).
"Permitted Liens" shall have the meaning provided in Section
9.01.
"Permitted Rights Plan" shall mean any shareholder rights plan
adopted by the U.S. Borrower (i.e., a "poison pill"), so long as the respective
rights plan only entitles the holders (or specified holders) of the U.S.
Borrower's common stock to obtain or purchase additional shares of the U.S.
Borrower's stock or preferred stock meeting the requirements of the immediately
succeeding sentence (but not preferred stock, promissory notes or other assets)
in accordance with the terms provided in the respective plan. Any preferred
stock to be issued pursuant to any Permitted Rights Plan shall be preferred
stock of the U.S. Borrower which is not redeemable (except at the sole option of
the U.S. Borrower) prior to the second anniversary of the Tranche C Term Loan
Maturity Date as then in effect, provides that dividends may be paid thereon in
kind (through the issuance of additional shares of such preferred stock), rather
than in cash, and expressly provides that no payments shall be permitted to be
made thereon if the making of the respective such payment will violate the terms
of this Agreement or any other agreement relating to Indebtedness for borrowed
money of the U.S. Borrower.
"Person" shall mean any individual, partnership, joint venture,
limited liability company, firm, corporation, association, trust or other
enterprise or any government or political subdivision or any agency, department
or instrumentality thereof.
"PIK Preferred Drawdown Date" shall mean the date occurring after
the Initial Borrowing Date upon which payments are made to redeem all of the
then outstanding Existing PIK Preferred Stock, which date must occur on or prior
to the date which occurs 45 days after the Initial Borrowing Date.
"Plan" shall mean any pension plan as defined in Section 3(2) of
ERISA, which is maintained or contributed to by (or to which there is an
obligation to contribute
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of) the U.S. Borrower or a Subsidiary of the U.S. Borrower or an ERISA
Affiliate, and each such plan for the five year period immediately following the
latest date on which the U.S. Borrower, or a Subsidiary of the U.S. Borrower or
an ERISA Affiliate maintained, contributed to or had an obligation to contribute
to such plan.
"Pledge Agreement" shall mean and include the U.S. Pledge
Agreement and the German Pledge Documents.
"Pledged Securities" shall mean all "Pledged Securities" as
defined in the relevant Pledge Agreement.
"Pledged Securities Requisite Gaming Approvals" shall have the
meaning provided in Section 13.18(c).
"Preferred Stock" as applied to the capital stock of any Person,
means capital stock of such Person (other than common stock of such Person) of
any class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of capital
stock of any other class of such Person.
"Prime Lending Rate" shall mean the rate which CSFB announces
from time to time as its prime lending rate, the Prime Lending Rate to change
when and as such prime lending rate changes. The Prime Lending Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. CSFB may make commercial loans or other loans
at rates of interest at, above or below the Prime Lending Rate.
"Pro Forma Basis" shall mean, as to any Person, for any of the
following events which occur subsequent to the commencement of a period for
which the financial effect of such event is being calculated, and giving effect
to the event for which such calculation is being made, such calculation as will
give pro forma effect to such event as if same had occurred at the beginning of
such period of calculation, and
(i) for purposes of the foregoing calculation, the transaction
giving rise to the need to calculate the pro forma effect to any of the
following events shall be assumed to have occurred on the first day of
the four fiscal quarter period last ended before the occurrence of the
respective event for which such pro forma effect is being determined
(the "Reference Period"), and
(ii) in making any determination with respect to the incurrence
or assumption of any Indebtedness during the Reference Period or
subsequent to the Reference Period and on or prior to the date of the
transaction referenced in clause (i) above (the "Transaction Date"), (x)
all Indebtedness (including the Indebtedness
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incurred or assumed 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 not to finance any Permitted Acquisition)
incurred or permanently repaid during the Reference Period shall be
deemed to have been incurred or repaid at the beginning of such period,
(y) Consolidated Interest Expense of such Person attributable to
interest or dividends on any Indebtedness, as the case may be, bearing
floating interest rates should be computed on a pro forma basis as if
the rate in effect on the Transaction Date had been the applicable rate
for the entire period and (z) Consolidated Interest Expense will be
increased or reduced by the net cost (including amortization of
discount) or benefit (after giving effect to amortization of discount)
associated with the Interest Rate Protection Agreements, which will
remain in effect for the twelve-month period after the Transaction Date
and which shall have the effect of fixing the interest rate on the date
of computation, and
(iii) in making any determination of Consolidated EBITDA, pro
forma effect shall be given to any Permitted Acquisition, any
discontinued operations and any Asset Sale, in each case which occurred
during the Reference Period or subsequent to the Reference Period and
prior to the Transaction Date, as if such Permitted Acquisition,
discontinuance of operations or Asset Sale, as the case may be, occurred
on the first day of the Reference Period.
All pro forma determinations required above shall be determined in accordance
with GAAP. For purposes of this definition, whenever pro forma effect is to be
given to any occurrence or event, the pro forma calculations shall be determined
in good faith by a responsible financial or accounting officer of the U.S.
Borrower.
"Projections" shall mean the projected financial statements of the
U.S. Borrower and its subsidiaries contained in the Bank Information Memorandum.
"Proprietary Gaming Operations" shall mean and include networked
progressive systems and games, second feature/multi-level niche games, network
gaming, new video product platforms and any electronic gaming machines for which
the U.S. Borrower and its Subsidiaries receive a participation in revenues.
"Quarterly Payment Date" shall mean the last Business Day of each
October, January, April and July occurring after the Initial Borrowing Date.
"Rainbow Debt" shall mean Indebtedness of RCVP in the original
principal amount of $12,000,000 in respect of loans made by National Gaming
Mississippi, Inc. to RCVP.
"Rainbow Royalty Payments" shall mean the payments required to be
paid
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made by Rainbow Casino Corporation ("RCC") under a Marketing and Services
Agreement dated as of March 15, 1994 between RCC and HFS Games Corp., which
payment obligations of RCC were assumed by RCVP upon the contribution by RCC of
the Rainbow Casino to RCVP.
"RCRA" shall mean the Resource Conservation and Recovery Act, as
the same may be amended from time to time, 42 U.S.C. Section 6901 et seq.
"RCVP" shall mean Rainbow Casino-Vicksburg Partnership, L.P., a
Mississippi Limited partnership.
"Real Property" of any Person shall mean all the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Recovery Event" shall mean the receipt by the U.S. Borrower or
any of its Subsidiaries of any cash insurance proceeds or condemnation awards
payable (i) by reason of theft, loss, physical destruction or damage or any
other similar event with respect to any property or assets of the U.S. Borrower
or any of its Subsidiaries and (ii) under any policy of insurance required to be
maintained under Section 8.03; provided that the term "Recovery Event" shall
exclude any receipt of cash insurance proceeds or condemnation awards in
connection with a single occurrence or event (but treating a series of related
occurrences or events as a single occurrence or event) where the aggregate
amount of cash proceeds so received by the U.S. Borrower and its Subsidiaries
does not exceed $100,000.
"Refinancing" shall mean the various refinancing transactions
described in clauses (ii), (iii) and (v) of the definition of Transaction
contained herein.
"Register" shall have the meaning provided in Section 13.15.
"Regulation D" shall mean Regulation D of the Board of Governors
of the Federal Reserve System as from time to time in effect and any successor
to all or a portion thereof establishing reserve requirements.
"Regulation G" shall mean Regulation G of the Board of Governors
of the Federal Reserve System as from time to time in effect and any successor
to all or a portion thereof.
"Regulation T" shall mean Regulation T of the Board of Governors
of the Federal Reserve System as from time to time in effect and any successor
to all or a portion thereof.
"Regulation U" shall mean Regulation U of the Board of Governors
of the Federal Reserve System as from time to time in effect and any successor
to all or a portion thereof.
"Regulation X" shall mean Regulation X of the Board of Governors
of the
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Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof.
"Release" means disposing, discharging, injecting, spilling,
pumping, leaking, leaching, dumping, emitting, escaping, emptying, pouring or
migrating, into or upon any land or water or air, or otherwise entering into the
environment.
"Replaced Lender" shall have the meaning provided in Section 1.13.
"Replacement Lender" shall have the meaning provided in Section
1.13.
"Reportable Event" shall mean an event described in Section
4043(c) of ERISA with respect to a Plan that is subject to Title IV of ERISA
other than those events as to which the 30-day notice period is waived under
subsection .22, .23, .25, .27 or .28 of PBGC Regulation Section 4043.
"Required Lenders" shall mean Non-Defaulting Lenders the sum of
whose outstanding Term Loans (and, prior to the termination thereof, Term Loan
Commitments) and Revolving Loan Commitments (or after the termination thereof,
outstanding Revolving Loans and RL Percentage and/or German RL Percentage, as
the case may be, of all Letter of Credit Outstandings and outstanding Swingline
Loans) represent an amount greater than 50% of the sum of all outstanding Term
Loans (and, if prior to the termination thereof, Term Loan Commitments) of
Non-Defaulting Lenders and the Total Revolving Loan Commitment less the
Revolving Loan Commitments of Defaulting Lenders (or after the termination of
the Total Revolving Loan Commitment, the sum of the then total outstanding
Revolving Loans of Non-Defaulting Lenders, and the aggregate RL Percentages
and/or German RL Percentage, as the case may be, of all Non-Defaulting Lenders
of Letter of Credit Outstandings and outstanding Swingline Loans at such time).
For purposes of determining Required Lenders, all outstanding Loans and
Commitments, as the case may be, that are denominated in Dollars will be
calculated in Dollars and all Loans and Commitments, as the case may be,
denominated in Deutsche Marks will be calculated according to the Dollar
Equivalent thereof.
"Restricted Payments" shall mean (a) any payment of any
Distributions with respect to the U.S. Borrower or any of its Subsidiaries by
the U.S. Borrower or any of its Subsidiaries and (b) the making (or the giving
of any notice in respect thereof) by the U.S. Borrower or any of its
Subsidiaries of any voluntary or mandatory payment, purchase, acquisition or
redemption, whether by the making of any payments of the principal, interest or
otherwise, in respect of any Preferred Stock of such Person, the
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Existing Senior Secured Notes or the New Senior Subordinated Notes; provided
that payments of regularly accruing interest and liquidated damages in
accordance with the requirements of the Existing Senior Secured Notes and the
New Senior Subordinated Notes (to the extent the payment is permitted in
accordance the subordination provisions applicable to the New Senior
Subordinated Notes) shall not constitute Restricted Payments.
"Returns" shall have the meaning provided in Section 7.09.
"Revolving Loan" shall have the meaning provided in Section
1.01(f).
"Revolving Loan Borrowers" shall mean and include each of the U.S.
Borrower and each German Borrower.
"Revolving Loan Commitment" shall mean, for each Lender, the
amount set forth opposite such Lender's name in Schedule I-A directly below the
column entitled "Revolving Loan Commitment," as the same may be (x) reduced from
time to time pursuant to Sections 3.02, 3.03 and/or 10 or (y) adjusted from time
to time as a result of assignments to or from such Lender pursuant to Section
1.13 or 13.04(b).
"Revolving Loan Commitment Commission" shall have the meaning
provided in Section 3.01(b).
"Revolving Loan Maturity Date" shall mean July 30, 2003.
"RL Percentage" of any Lender at any time shall mean a fraction
(expressed as a percentage) the numerator of which is the Non-German Revolving
Loan Sub-Commitment of such Lender at such time and the denominator of which is
the aggregate amount of Non-German Revolving Loan Commitments of all Lenders at
such time, or, in the case of a Lender that is, or whose Affiliate is, a German
Revolving Lender, at any time when the Aggregate Non-German Revolving Exposure
equals or exceeds the aggregate of the Non-German Revolving Loan Commitments,
such Bank's or such Affiliate's German RL Percentage. Notwithstanding anything
to the contrary contained above, if the RL Percentage of any Lender is to be
determined after the Total Revolving Loan Commitment has been terminated, then
the RL Percentages of the Lenders shall be determined immediately prior (and
without giving effect) to such termination.
"Sale and Leaseback Transaction" shall mean any transaction
structured as a sale and leaseback or similar transaction.
"Scheduled Repayment" shall mean each U.S. Borrower Tranche A
Scheduled Repayment, each German Borrower Tranche A Scheduled Repayment, each
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Delayed Draw Scheduled Repayment, each Tranche B Scheduled Repayment and each
Tranche C Scheduled Repayment, as the case may be.
"SEC" shall have the meaning provided in Section 8.01(h).
"Section 4.04(b)(ii) Certificate" shall have the meaning provided
in Section 4.04(b)(ii).
"Secured Creditors" shall have the meaning assigned that term in
the respective Security Documents.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Securities Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder.
"Security Document" shall mean and include each U.S. Security
Document, each German Security Document and each security document entered into
by the U.S. Borrower or any Subsidiary of the U.S. Borrower pursuant to Section
8.11, 8.12, 8.14 and/or 9.16.
"Series E Preferred Stock" shall mean the U.S. Borrower's 11-1/2%
Non-Voting Junior Convertible Pay-In-Kind Special Stock Series E.
"Shareholders' Agreements" shall mean all agreements entered into
by the U.S. Borrower or any of its Subsidiaries governing the terms and relative
rights of its capital stock and any agreements entered into by shareholders
relating to any such entity with respect to its capital stock.
"Specified Inactive Subsidiaries" shall mean and include each of:
APT Coin Machines, Inc.
Trolley Stop, Inc.
Oregon Ventures, Inc.
Indiana Gaming Ventures, Inc.
United Games, Inc.
Mizpah Investments, Inc.
United Gaming Ventures, Inc.
Mississippi Ventures II, Inc.
WCAL, Inc.
Slot Palace, Inc. (dba Quality Inn)
Vermont Financial Venture, Inc.
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Missouri Ventures II, Inc.
FCJI, Inc.
Douglas Eagle Hotel & Casino, Inc.
Pennsylvania Gaming Ventures, Inc.
Bally Wulff Beteiligungs GmbH
Kuepper GmbH
"Specified Non-Material Subsidiaries" shall mean (i) on and after
the Initial Borrowing Date, each of:
Casino Electronics, Inc.
Mississippi Ventures, Inc.
United Gaming of Iowa, Inc.
United Native American, Inc.
Kansas Gaming Ventures, Inc.
Kansas Gaming Partners, LLC
Kansas Financial Partners, LLC
Alpine Willow Investments, Inc.
and (ii) after the Initial Borrowing Date, any additional Wholly-Owned
Subsidiary established, created or acquired after the Initial Borrowing Date
which at the time of such establishment, creation or acquisition is designated
as a Specified Non-Material Subsidiary; provided that no Subsidiary shall be
designated as a Specified Non-Material Subsidiary at any time when (x) the
aggregate book value or fair market value (as determined in good faith by the
U.S. Borrower), whichever is greater, of all assets of such Subsidiary is equal
to or in excess of $5,000,000 or (y) if immediately after giving effect to such
designation, the aggregate book value or fair market value (as determined in
good faith by the U.S. Borrower), whichever is greater, of all assets of all
Specified Non-Material Subsidiaries is equal to or in excess of $15,000,000.
Notwithstanding anything to the contrary contained above, (i) at any time when
the assets of any Subsidiary therefore designated as a Specified Non-Material
Subsidiary exceed the amount provided in clause (x) of the immediately preceding
sentence, such Subsidiary shall automatically cease to constitute a Specified
Non-Material Subsidiary, (y) at any time when the assets of all Specified
Non-Material Subsidiaries exceed the amount specified in clause (y) of the
immediately preceding sentence, one or more Specified Non-Material Subsidiaries
(as designated by the U.S. Borrower or, in the absence of any such designation,
as designated by the Administrative Agent) shall cease to constitute Specified
Non-Material Subsidiaries, so that the thresholds described in clause (y) of the
immediately preceding sentence are not exceeded and (iii) the U.S. Borrower may,
at its discretion, at any time, by giving written notice to the Administrative
Agent, designate a Subsidiary as no longer constituting a Specified Non-Material
Subsidiary (in which case such Subsidiary shall no longer constitute a Specified
Non-Material Subsidiary).
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"Standby Letter of Credit" shall have the meaning provided in
Section 2.01(a).
"Start Date" shall mean, with respect to any Margin Adjustment
Period, the first day of such Margin Adjustment Period.
"Stated Amount" of each Letter of Credit shall, at any time, mean
the maximum amount available to be drawn thereunder (in each case determined
without regard to whether any conditions to drawing could then be met, but after
giving effect to all previous drawings made thereunder), provided that the
"Stated Amount" of each Letter of Credit denominated in any currency other than
Dollars shall be (except to the extent that calculations are expressly required
to be made hereunder in Deutsche Marks), on any date of calculation, the Dollar
Equivalent of the maximum amount available to be drawn in such other currency
thereunder (determined without regard to whether any conditions to drawing could
then be met).
"Subsidiary" shall mean, as to any Person, (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one or
more Subsidiaries of such Person and (ii) any partnership, association, joint
venture or other entity in which such Person and/or one or more Subsidiaries of
such Person has more than a 50% equity interest at the time.
"Subsidiary Guarantor" shall mean each Subsidiary of the U.S.
Borrower which has executed and delivered a Guaranty.
"Subsidiary Guaranty" shall mean and include the U.S. Subsidiaries
Guaranty and each Foreign Subsidiaries Guaranty.
"Subsidiary Stock Restrictions" shall mean the negative pledge
(i.e., the prohibition of Liens pursuant to Section 9.01), and restrictions on
transfers pursuant to Section 9.02, on the capital stock of (x) APT Games, Inc.,
Casino Electronics, Inc., Bally Gaming International, Inc., Bally Gaming Inc.,
Plantation Investments, Inc. and United Coin Machine Co. and (y) Bally Gaming,
Inc. and the general and limited partnership interests of RCVP, in each case to
the extent such restrictions, to be included in the Agreement, require the
approval of (i) in the case of the Persons listed in preceding clause (x), the
Nevada Gaming Commission acting upon the recommendation of the Nevada State
Gaming Control Board and (ii) in the case of the Persons listed in preceding
clause (y), the Mississippi Gaming Commission.
"Subsidiary Stock Restrictions Approval Date" shall mean the first
date
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occurring after the Initial Borrowing Date upon which (i) all requisite
approvals of Gaming Authorities have been obtained to the Subsidiary Stock
Restrictions, so that same may be fully effective in accordance with the terms
of this Agreement (without giving effect to the limitations provided in Section
13.18(c)) and (ii) the Administrative Agent shall have received a satisfactory
opinion of Nevada and Mississippi counsel to the U.S. Borrower to the effect
that such approvals have been obtained and that the Subsidiary Stock
Restrictions contained in this Agreement are fully enforceable in accordance
with the terms hereof, which opinion shall be in form and substance reasonably
satisfactory to the Administrative Agent.
"Subsidiary Stock Restrictions Requisite Gaming Approvals" shall
have the meaning provided in Section 13.18(c).
"Substitute Lender" shall have the meaning provided in Section
13.04(c).
"Supermajority Lenders" of any Tranche shall mean those Non-
Defaulting Lenders which would constitute the Required Lenders under, and as
defined in, this Agreement if (x) all outstanding Obligations of the other
Tranches under this Agreement were repaid in full and all Commitments with
respect thereto were terminated and (y) the percentage "50%" contained therein
were changed to "66-2/3%."
"SVS" shall mean Southern Video Services, Inc., a Louisiana
corporation which, as of the Initial Borrowing Date, is 49% owned by LVI.
"Swingline Expiry Date" shall mean the date which is five (5)
Business Days prior to the Revolving Loan Maturity Date.
"Swingline Loan" shall have the meaning provided in Section
1.01(g).
"Swingline Note" shall have the meaning provided in Section
1.05(a).
"Syndication Date" shall have the meaning provided in Section
1.01(a).
"Target" shall have the meaning assigned that term in the
definition of "Two-Step Permitted Acquisition".
"Taxes" shall have the meaning provided in Section 4.04(a).
"Term Loan" shall mean each U.S. Borrower Tranche A Term Loan,
each German Borrower Tranche A Term Loan, each Delayed Draw Term Loan, each
Tranche B Term Loan and each Tranche C Term Loan.
"Term Loan Commitment" shall mean each U.S. Borrower Tranche A
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Term Loan Commitment, each German Borrower Tranche A Term Loan Commitment, each
Delayed Draw Term Loan Commitment, each Tranche B Term Loan Commitment and each
Tranche C Term Loan Commitment.
"Term Loan Commitment Commission" shall have the meaning provided
in Section 3.01(a).
"Test Date" shall mean the last day of each fiscal quarter ended
after the Initial Borrowing Date.
"Test Period" shall mean each period of four consecutive fiscal
quarters of the U.S. Borrower ended after the Initial Borrowing Date.
"Total Commitments" shall mean, at any time, the sum of the
Commitments of each of the Lenders.
"Total Delayed Draw Term Loan Commitment" shall mean, at any
time, the sum of the Delayed Draw Term Loan Commitments of each of the Lenders.
"Total German Borrower Tranche A Term Loan Commitment" shall
mean, at any time, the sum of the German Borrower Tranche A Term Loan
Commitments of each of the Lenders.
"Total German Revolving Loan Sub-Commitment" at any time shall
mean the sum of the German Revolving Loan Sub-Commitments of all the German
Revolving Lenders; provided that at no time shall the Total German Revolving
Loan Sub-Commitment exceed the Total Revolving Loan Commitment as then in
effect.
"Total Non-German Revolving Loan Sub-Commitment" at any time
shall mean the sum of the Non-German Revolving Loan Sub-Commitments of all the
Lenders; provided that at no time shall the Total Non-German Revolving Loan Sub-
Commitment exceed the Total Revolving Loan Commitment as then in effect.
"Total Revolving Loan Commitment" shall mean, at any time, the
sum of the Revolving Loan Commitments of each of the Lenders.
"Total Term Loan Commitment" shall mean, at any time, the sum of
the Total U.S. Borrower Tranche A Term Loan Commitment, the Total German
Borrower Tranche A Term Loan Commitment, the Total Delayed Draw Term Loan
Commitment, the Total Tranche B Term Loan Commitment and the Total Tranche C
Term Loan Commitment.
"Total Tranche B Term Loan Commitment" shall mean, at any time,
the
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sum of the Tranche B Term Loan Commitments of each of the Lenders.
"Total Tranche C Term Loan Commitment" shall mean, at any time,
the sum of the Tranche C Term Loan Commitments of each of the Lenders.
"Total Unutilized Revolving Loan Commitment" shall mean, at any
time, an amount equal to the remainder of (x) the Total Revolving Loan
Commitment then in effect, less (y) the sum of (I) the aggregate principal
amount of Revolving Loans then outstanding (or the Dollar Equivalent thereof in
the case of Deutsche Mark Revolving Loans then outstanding) plus (II) the
aggregate principal amount of Swingline Loans then outstanding plus (III) the
then aggregate amount of Letter of Credit Outstandings.
"Total U.S. Borrower Tranche A Term Loan Commitment" shall mean,
at any time, the sum of the U.S. Borrower Tranche A Term Loan Commitments of
each of the Lenders.
"Trade Letter of Credit" shall have the meaning provided in
Section 2.01(a).
"Tranche" shall mean the respective facility and commitments
utilized in making Loans hereunder, with there being seven separate Tranches,
i.e., U.S. Borrower Tranche A Term Loans, German Borrower Tranche A Term Loans,
Delayed Draw Term Loans, Tranche B Term Loans, the Tranche C Term Loans,
Revolving Loans and Swingline Loans.
"Tranche A Term Loan Maturity Date" shall mean July 31, 2003.
"Tranche B Scheduled Repayment" shall have the meaning provided
in Section 4.02(b)(iv).
"Tranche B Scheduled Repayment Date" shall have the meaning
provided in Section 4.02(b)(iv).
"Tranche B Term Loan" shall have the meaning provided in Section
1.01(d).
"Tranche B Term Loan Borrowing Date" shall mean each date on or
after the Initial Borrowing Date on which Tranche B Term Loans are incurred
hereunder.
"Tranche B Term Loan Commitment" shall mean, for each Lender, the
amount set forth opposite such Lender's name in Schedule I-A directly below the
column entitled "Tranche B Term Loan Commitment", as the same may be (x) reduced
from time to time pursuant to Sections 3.03, 4.02 and/or 10 and (y) adjusted
from time to time as a
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result of assignments to or from such Lender pursuant to Section 1.13 or
13.04(b).
"Tranche B Term Loan Commitment Termination Date" shall mean the
date which occurs 45 days after the Initial Borrowing Date.
"Tranche B Term Loan Maturity Date" shall mean January 31, 2005.
"Tranche B Term Note" shall have the meaning provided in Section
1.05(a).
"Tranche C Scheduled Repayment" shall have the meaning provided
in Section 4.02(b)(v).
"Tranche C Scheduled Repayment Date" shall have the meaning
provided in Section 4.02(b)(v).
"Tranche C Term Loan" shall have the meaning provided in Section
1.01(e).
"Tranche C Term Loan Commitment" shall mean, for each Lender, the
amount set forth opposite such Lender's name in Schedule I-A directly below the
column entitled "Tranche C Term Loan Commitment", as the same may be (x) reduced
from time to time pursuant to Sections 3.03, 4.02 and/or 10 or (y) adjusted from
time to time as a result of assignments to or from such Lender pursuant to
Section 1.13 or 13.04(b).
"Tranche C Term Loan Commitment Termination Date" shall mean the
date which occurs 45 days after the Initial Borrowing Date.
"Tranche C Term Loan Maturity Date" shall mean July 31, 2005.
"Tranche C Term Note" shall have the meaning provided in Section
1.05(a).
"Transaction" shall mean, collectively, (i) the issuance by the
U.S. Borrower of the Senior Subordinated Notes, (ii) the consummation of the
Existing Senior Secured Notes Tender Offer/Consent Solicitation and the making
of the Existing Senior Secured Notes Tender Offer Repurchases pursuant thereto
and the amendments to the Existing Senior Secured Notes Indenture and Existing
Senior Secured Notes Collateral Documents as contemplated therein, (iii) the
repayment of all amounts owing, and the termination of all commitments, in
respect of the Indebtedness to be Refinanced, (iv) the incurrence of Loans on
the Initial Borrowing Date, (v) the redemption of all outstanding Existing PIK
Preferred Stock, (vi) the purchase of the Rainbow Royalty Payments and Rainbow
Debt as contemplated by Section 5B.02 and (vii) the payment of fees and
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expenses owing in connection with the foregoing.
"Two-Step Permitted Acquisition" shall mean the acquisition by
the U.S. Borrower or any Wholly-Owned Subsidiary of the U.S. Borrower of at
least 80% of the capital stock of any Person (a "Target") not already a
Subsidiary of the U.S. Borrower by way of (x) a tender offer for, or other
acquisition of, capital stock of such Target (with the actions taken pursuant to
preceding clause (x) being herein called the "First Step" of the respective
Two-Step Permitted Acquisition) and (y) a subsequent merger of the Target with
and into the U.S. Borrower or with and into a Subsidiary of the U.S. Borrower or
a subsequent compulsory acquisition of outstanding shares of capital stock (or
common stock) of the Target as a result of which the 80% requirement referred to
above is satisfied; provided that (i) any such Two-Step Permitted Acquisition
shall be effected in accordance with the definition of Permitted Acquisition,
(ii) the subsequent merger or compulsory share acquisition to be effected as
part of such Two-Step Permitted Acquisition shall be consummated as soon as
practicable after the consummation of the tender offer portion thereof but in
any event within 270 days thereafter, (iii) upon the consummation of the First
Step of any such Two-Step Permitted Acquisition, the U.S. Borrower or its
respective Subsidiary shall have acquired sufficient shares of the outstanding
capital stock of the respective Target to effect (without any vote by any other
stockholders of Target) the subsequent merger (as a result of which the Target
shall be merged into the U.S. Borrower or become an 80%-owned Subsidiary of the
U.S. Borrower) or compulsory share acquisition within 270 days after the
consummation of said tender offer and (iv) prior to the consummation of the
First Step of any such Two-Step Permitted Acquisition, the U.S. Borrower shall
have available to it sufficient Committed Financing to effect such Two-Step
Permitted Acquisition (and to make all payments owing in connection with both
steps thereof).
"Type" shall mean the type of Loan determined with regard to the
interest option applicable thereto, i.e., whether a Base Rate Loan, a Eurodollar
Loan or a Deutsche Mark Loan.
"UCC" shall mean the Uniform Commercial Code as from time to time
in effect in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan shall mean the amount,
if any, by which the actuarial present value of the accumulated plan benefits
under the Plan as of the close of its most recent plan year, determined in
accordance with actuarial assumptions at such time consistent with Statement of
Financial Accounting Standards No. 87, exceeds the market value of the assets
allocable thereto.
"United Coin Machine Notes" shall mean promissory notes arising
from time to time in the ordinary course of business of United Coin Machine Co.
and payable to it by customers (primarily bar and restaurant owners).
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"United Coin Machine Percentage Notes" shall be any United Coin
Machine Note which provides for payments thereon to be based, in whole or in
part, on a percentage of the gaming revenues of the respective obligor or
equipment financed with the respective promissory note.
"United States" and "U.S." shall each mean the United States of
America.
"Unpaid Drawing" shall have the meaning provided for in Section
2.05(a).
"Unutilized Revolving Loan Commitment" with respect to any
Lender, at any time, shall mean such Lender's Revolving Loan Commitment at such
time less the sum of (x) the aggregate principal amount of Revolving Loans of
such Lender (including any Affiliate of any such Lender acting as a German
Revolving Lender) then outstanding (taking the Dollar Equivalent thereof in the
case of any Deutsche Mark Revolving Loans then outstanding), (y) such Lender's
RL Percentage of the U.S. Letter of Credit Outstandings and (z) such Lender's
(or the related German Revolving Lender's) German RL Percentage of the German
Letter of Credit Outstandings; provided that the Unutilized Revolving Loan
Commitment of CFSB shall at any time and from time to time be deemed reduced
(but not below zero) by the aggregate principal amount of Swingline Loans made
by it which are then outstanding.
"U.S. Borrower" shall have the meaning provided in the first
paragraph of this Agreement.
"U.S. Borrower Common Stock" shall mean the common stock of the
U.S. Borrower.
"U.S. Borrower Tranche A Term Loan" shall have the meaning
provided in Section 1.01(a).
"U.S. Borrower Tranche A Term Loan Commitment" shall mean, for
each Lender, the amount set forth opposite such Lender's name in Schedule I-A
directly below the column entitled "U.S. Borrower Tranche A Term Loan
Commitment", as the same may be (x) reduced from time to time pursuant to
Sections 3.03, 4.02 and/or 10 or (y) adjusted from time to time as a result of
assignments to or from such Lender pursuant to Section 1.13 or 13.04(b).
"U.S. Borrower Tranche A Term Loan Commitment Termination Date"
shall mean the date which occurs 45 days after the Initial Borrowing Date.
"U.S. Borrower Tranche A Term Note" shall have the meaning
provided in Section 1.05(a).
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"U.S. Borrower Tranche A Scheduled Repayment" shall have the
meaning provided in Section 4.02(b)(i).
"U.S. Borrower Tranche A Scheduled Repayment Date" shall have the
meaning provided in Section 4.02(b)(i).
"U.S. Borrowing Base" shall mean, as at any date of which the
amount thereof is being determined, an amount (expressed in Dollars) equal to
the sum of (i) 75% of U.S. Eligible Receivables and (ii) 40% of U.S. Eligible
Inventory, each as determined for the Borrowing Base Certificate most recently
delivered pursuant to Section 8.01(j).
"U.S. Eligible Inventory" shall mean the book value of the
inventory of the U.S. Borrower and the Wholly-Owned Subsidiary Guarantors which
conforms to the representations and warranties contained in the U.S. Security
Agreement (and in which a Lien has been granted pursuant to the U.S. Security
Agreement) which inventory is located in the United States less (i) any supplies
(other than raw materials), goods returned or rejected (except to the extent
that such returned or rejected goods continue to conform to the representations
and warranties contained in the U.S. Security Agreement) by customers and goods
returned to suppliers, (ii) all used equipment otherwise reflected in such
inventory, (iii) any advance payments made by customers with respect to
inventory of the U.S. Borrower and Wholly-Owned Subsidiary Guarantors and (iv)
inventory subject to any Lien other than Liens created under the Security
Agreement.
"U.S. Eligible Receivables" shall mean the gross book value of the
receivables of the U.S. Borrower and the Wholly-Owned Subsidiary Guarantors
arising from the sale or lease of inventory or services by the U.S. Borrower or
the Wholly- Owned Subsidiary Guarantors in the ordinary course of business which
conform to the representations and warranties contained in the Security
Agreement (including, without limitation, that the Collateral Agent shall have
and maintain a first priority perfected security interest in all such
receivables) less any returns and claims of any nature (whether issued, owing,
granted or outstanding) and excluding (i) bill and hold (deferred shipment) and
consignment transactions, (ii) contracts or sales to any Affiliate, (iii) all
installment or lease receivables where the respective account debtor has two or
more installments which are past due, (iv) all receivables from any party
subject to any bankruptcy, receivership insolvency or like proceedings by the
account debtor, and (v) excluding one-third of the amount of all receivables to
account debtors outside the United States of America which would otherwise have
been included as U.S. Eligible Receivables. Notwithstanding anything to the
contrary contained above, to the extent that the book reserves in respect of
receivables of the U.S. Borrower and the Wholly-Owned Subsidiary Guarantors
would exceed 20% of the gross book value of the receivables of such Persons on
their financial statements as prepared in accordance with GAAP, the amount of
such excess reserves shall apply to reduce the amount of U.S. Eligible
Receivables.
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"U.S. Letter of Credit" shall mean each Letter of Credit issued
for the account of the U.S. Borrower pursuant to Section 2.01.
"U.S. Letter of Credit Outstandings" shall mean, at any time, the
sum of (i) the aggregate Stated Amount of all outstanding U.S. Letters of Credit
and (ii) the amount of all Unpaid Drawings with respect to U.S. Letters of
Credit.
"U.S. Pledge Agreement" shall have the meaning provided in Section
5A.13.
"U.S. Pledge Agreement Collateral" shall mean all "Collateral" as
defined in the U.S. Pledge Agreement.
"U.S. Security Agreement" shall have the meaning provided in
Section 5A.14.
"U.S. Security Agreement Collateral" shall mean all "Collateral"
as defined in the U.S. Security Agreement.
"U.S. Security Document" shall mean and include each of the U.S.
Security Agreement, the U.S. Pledge Agreement, each Mortgage and, after the
execution and delivery thereof, each Additional Security Document executed and
delivered by the U.S. Borrower or any Domestic Subsidiary thereof.
"U.S. Subsidiary Guarantor" shall mean each Domestic Subsidiary of
the U.S. Borrower which has executed and delivered a U.S. Subsidiaries Guaranty
or an Additional Guaranty unless and until such Person is released from the
respective such Guaranty in accordance with the terms thereof.
"U.S. Subsidiaries Guaranty" shall have the meaning provided in
Section 5A.12.
"VDSI" shall mean Video Distributing Services, Inc., a Louisiana
corporation which, as of the Initial Borrowing Date, is 49% owned by LVI.
"Voting Stock" shall mean, as to any Person, any class or classes
of capital stock of such Person pursuant to which the holders thereof have the
general voting power under ordinary circumstances to elect at least a majority
of the Board of Directors of such Person.
"VSI" shall mean Video Services, Inc., a Louisiana corporation
which, as of the Initial Borrowing Date, is 49% owned by LVI.
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"Waivable Repayment" shall have the meaning provided in Section
4.05.
"Wholly-Owned Domestic Subsidiary" shall mean any Subsidiary of
the U.S. Borrower which is both a Domestic Subsidiary and a Wholly-Owned
Subsidiary of the U.S. Borrower.
"Wholly-Owned Foreign Subsidiary" shall mean any Subsidiary of the
U.S. Borrower which is both a Foreign Subsidiary and a Wholly-Owned Subsidiary
of the U.S. Borrower.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any
corporation 100% of whose capital stock is at the time owned by such Person
and/or one or more Wholly-Owned Subsidiaries of such Person and (ii) any
partnership, association, joint venture or other entity in which such Person
and/or one or more Wholly-Owned Subsidiaries of such Person has a 100% equity
interest at such time. Notwithstanding anything to the contrary contained above,
a Foreign Subsidiary of the U.S. Borrower shall be deemed to be a Wholly-Owned
Subsidiary of the U.S. Borrower if both (x) it would satisfy the requirements of
the definition contained above with respect to the U.S. Borrower if the
percentages "100%" contained above were changed to "99%" and (y) the reduction
to 99% as contemplated by preceding clause (x) is necessary because director's
qualifying shares, ownership of shares by foreign nationals, or other ownership
requirements apply under applicable law (or is necessary to obtain applicable
approvals required by law) to the respective such Foreign Subsidiary.
"Wholly-Owned Subsidiary Guarantors" shall mean, at any time,
each U.S. Subsidiary Guarantor which has executed and delivered a counterpart of
the U.S. Subsidiaries Guaranty (unlimited as to the amount guaranteed), and
which is a Wholly- Owned Domestic Subsidiary of the U.S. Borrower at such time.
"Withdrawal Period" shall have the meaning provided in Section
13.04(d).
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SECTION 12. The Administrative Agent.
12.01 Appointment. The Lenders hereby designate CSFB as
Administrative Agent (for purposes of this Section 12, the term "Administrative
Agent" shall include CSFB in its capacity as Collateral Agent pursuant to the
Security Documents) to act as specified herein and in the other Credit
Documents. Each Lender hereby irrevocably authorizes, and each holder of any
Note by the acceptance of such Note shall be deemed irrevocably to authorize,
the Administrative Agent to take such action on its behalf under the provisions
of this Agreement, the other Credit Documents and any other instruments and
agreements referred to herein or therein and to exercise such powers and to
perform such duties hereunder and thereunder as are specifically delegated to or
required of the Administrative Agent by the terms hereof and thereof and such
other powers as are reasonably incidental thereto. The Administrative Agent may
perform any of its duties hereunder by or through its respective officers,
directors, agents, employees or affiliates.
12.02 Nature of Duties. The Administrative Agent shall not have
any duties or responsibilities except those expressly set forth in this
Agreement and in the other Credit Documents. Neither the Administrative Agent
nor any of its respective officers, directors, agents, employees or affiliates
shall be liable for any action taken or omitted by it or them hereunder or under
any other Credit Document or in connection herewith or therewith, unless caused
by its or their gross negligence or willful misconduct. The duties of the
Administrative Agent shall be mechanical and administrative in nature; the
Administrative Agent shall not have by reason of this Agreement or any other
Credit Document a fiduciary relationship in respect of any Lender or the holder
of any Note; and nothing in this Agreement or any other Credit Document,
expressed or implied, is intended to or shall be so construed as to impose upon
the Administrative Agent any obligations in respect of this Agreement or any
other Credit Document except as expressly set forth herein or therein.
12.03 Lack of Reliance on the Administrative Agent. Independently
and without reliance upon the Administrative Agent, each Lender and the holder
of each Note, to the extent it deems appropriate, has made and shall continue to
make (i) its own independent investigation of the financial condition and
affairs of the Borrowers and their Subsidiaries in connection with the making
and the continuance of the Loans and the taking or not taking of any action in
connection herewith and (ii) its own appraisal of the creditworthiness of the
Borrowers and their Subsidiaries and, except as expressly provided in this
Agreement, the Administrative Agent shall not have any duty or responsibility,
either initially or on a continuing basis, to provide any Lender or the holder
of any Note with any credit or other information with respect thereto, whether
coming into its possession before the making of the Loans or at any time or
times thereafter. The Administrative Agent shall not be responsible to any
Lender or the holder of any Note for any recitals, statements, information,
representations or warranties herein or in any document, certificate or other
writing delivered in connection herewith or for the execution,
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effectiveness, genuineness, validity, enforceability, perfection,
collectibility, priority or sufficiency of this Agreement or any other Credit
Document or the financial condition of any Borrower or any of its Subsidiaries
or be required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of this Agreement or
any other Credit Document, or the financial condition of any Borrower or any of
its Subsidiaries or the existence or possible existence of any Default or Event
of Default.
12.04 Certain Rights of the Administrative Agent. If the
Administrative Agent shall request instructions from the Required Lenders with
respect to any act or action (including failure to act) in connection with this
Agreement or any other Credit Document, the Administrative Agent shall be
entitled to refrain from such act or taking such action unless and until the
Administrative Agent shall have received instructions from the Required Lenders;
and the Administrative Agent shall not incur liability to any Person by reason
of so refraining. Without limiting the foregoing, no Lender and no holder of any
Note shall have any right of action whatsoever against the Administrative Agent
as a result of the Administrative Agent acting or refraining from acting
hereunder or under any other Credit Document in accordance with the instructions
of the Required Lenders.
12.05 Reliance. The Administrative Agent shall be entitled to
rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, statement, certificate, telex, teletype or telecopier
message, cablegram, radiogram, order or other document or telephone message
signed, sent or made by any Person that the Administrative Agent believed to be
the proper Person, and, with respect to all legal matters pertaining to this
Agreement and any other Credit Document and its duties hereunder and thereunder,
upon advice of counsel selected by the Administrative Agent.
12.06 Indemnification. To the extent the Administrative Agent is
not reimbursed and indemnified by the U.S. Borrower or any of its Subsidiaries,
the Lenders will reimburse and indemnify the Administrative Agent, in proportion
to their respective "percentages" as used in determining the Required Lenders
(for this purpose, determined as if there were no Defaulting Lenders at such
time), for and against any and all liabilities, obligations, losses, damages,
penalties, claims, actions, judgments, costs, expenses or disbursements of
whatsoever kind or nature which may be imposed on, asserted against or incurred
by the Administrative Agent in performing its respective duties hereunder or
under any other Credit Document, in any way relating to or arising out of this
Agreement or any other Credit Document; provided that no Lender shall be liable
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
Administrative Agent's gross negligence or willful misconduct.
12.07 The Administrative Agent in its Individual Capacity. With
respect to its obligation to make Loans, or issue or participate in Letters of
Credit, under this
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Agreement, the Administrative Agent shall have the rights and powers specified
herein for a "Lender" and may exercise the same rights and powers as though it
were not performing the duties specified herein; and the term "Lenders,"
"Required Lenders," "Majority Lenders," "Supermajority Lenders," "holders of
Notes" or any similar terms shall, unless the context clearly otherwise
indicates, include the Administrative Agent in its individual capacity. The
Administrative Agent may accept deposits from, lend money to, and generally
engage in any kind of banking, investment banking, trust or other business with
any Credit Party or any Affiliate of any Credit Party as if it were not
performing the duties specified herein, and may accept fees and other
consideration from any Credit Party for services in connection with this
Agreement and otherwise without having to account for the same to the Lenders.
12.08 Holders. The Administrative Agent may deem and treat the
payee of any Note as the owner thereof for all purposes hereof unless and until
a written notice of the assignment, transfer or endorsement thereof, as the case
may be, shall have been filed with the Administrative Agent. Any request,
authority or consent of any Person who, at the time of making such request or
giving such authority or consent, is the holder of any Note shall be conclusive
and binding on any subsequent holder, transferee, assignee or indorsee, as the
case may be, of such Note or of any Note or Notes issued in exchange therefor.
12.09 Resignation by the Administrative Agent. (a) The
Administrative Agent may resign from the performance of all its functions and
duties hereunder and/or under the other Credit Documents at any time by giving
15 Business Days' prior written notice to the Lenders and the Borrowers. Such
resignation shall take effect upon the appointment of a successor Administrative
Agent pursuant to clauses (b) and (c) below or as otherwise provided below,
provided that to the extent required by Applicable Gaming Regulations, the
incumbent Administrative Agent shall remain the Collateral Agent for the Secured
Creditors with respect to any Collateral for which a lienholder must be
qualified under such Gaming Regulations until the new Administrative Agent can
be so qualified (it being understood that the incumbent Administrative Agent
shall be entitled to the indemnities and other protections provided to the
Administrative Agent hereunder in such capacity).
(b) Upon any such notice of resignation, the Required Lenders
shall appoint a successor Administrative Agent hereunder or thereunder who shall
be a commercial bank or trust company reasonably acceptable to the U.S.
Borrower.
(c) If a successor Administrative Agent shall not have been so
appointed within such 15 Business Day period, the Administrative Agent, with the
consent of the U.S. Borrower (which consent shall not be unreasonably withheld
or delayed), shall then appoint a suc-
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cessor Administrative Agent who shall serve as Administrative Agent hereunder or
thereunder until such time, if any, as the Required Lenders appoint a successor
Administrative Agent as provided above.
(d) If no successor Administrative Agent has been appointed
pursuant to clause (b) or (c) above by the 20th Business Day after the date such
notice of resignation was given by the Administrative Agent, the Administrative
Agent's resignation shall become effective and the Required Lenders shall
thereafter perform all the duties of the Administrative Agent hereunder and/or
under any other Credit Document until such time, if any, as the Required Lenders
appoint a successor Administrative Agent as provided above.
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SECTION 13. Miscellaneous.
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13.01 Payment of Expenses, etc. The Borrowers jointly and
severally agree that they shall: (i) whether or not the transactions herein
contemplated are consummated, pay all reasonable out-of-pocket costs and
expenses of the Administrative Agent (including, without limitation, the
reasonable fees and disbursements of White & Case and the Administrative Agent's
local and foreign counsel and consultants) in connection with the preparation,
execution and delivery of this Agreement and the other Credit Documents and the
documents and instruments referred to herein and therein and any amendment,
waiver or consent relating hereto or thereto, of the Administrative Agent in
connection with its syndication efforts with respect to this Agreement and of
the Administrative Agent and, after the occurrence of an Event of Default, each
of the Lenders in connection with the enforcement of this Agreement and the
other Credit Documents and the documents and instruments referred to herein and
therein (including, without limitation, the reasonable fees and disbursements of
counsel for the Administrative Agent); (ii) pay and hold each of the Lenders
harmless from and against any and all present and future stamp, excise and other
similar documentary taxes with respect to the foregoing matters and save each of
the Lenders harmless from and against any and all liabilities with respect to or
resulting from any delay or omission (other than to the extent attributable to
such Lender) to pay such taxes; and (iii) indemnify the Administrative Agent and
each Lender, and each of their respective officers, directors, employees,
representatives and agents from and hold each of them harmless against any and
all liabilities, obligations (including removal or remedial actions), losses,
damages, penalties, claims, actions, judgments and suits, and all reasonable (in
the context of the actions required to be taken) costs, expenses and
disbursements (including reasonable attorneys' and consultants' fees and
disbursements) incurred by, imposed on or assessed against any of them as a
result of, or arising out of, or in any way related to, or by reason of, (a) any
investigation, litigation or other proceeding (whether or not the Administrative
Agent or any Lender is a party thereto) related to the entering into and/or
performance of this Agreement or any other Credit Document or the use of any
Letter of Credit or the proceeds of any Loans hereunder or the consummation of
any transactions contemplated herein or in any other Credit Document or the
exercise of any of their rights or remedies provided herein or in the other
Credit Documents, or (b) the actual or alleged presence of Hazardous Materials
in the air, surface water or ground- water or on the surface or subsurface of
any Real Property owned or at any time operated by the U.S. Borrower or any of
its Subsidiaries, the generation, storage, transportation, handling or disposal
of Hazardous Materials at any location, whether or not owned or operated by the
U.S. Borrower or any of its Subsidiaries, the non-compliance of any Real
Property with foreign, federal, state and local laws, regulations, and
ordinances (including applicable permits thereunder) applicable to any Real
Property, or any Environmental Claim asserted against the U.S. Borrower, any of
its Subsidiaries or any Real Property owned or at any time operated by the U.S.
Borrower or any of its Subsidiaries, including, in each case, without
limitation, the reasonable fees and disbursements of counsel and other
consultants incurred in connection with any such investigation, litigation or
other proceeding (but excluding any losses, liabilities, claims, damages or
expenses to the extent incurred by reason of the
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gross negligence or willful misconduct of the Person to be indemnified). To the
extent that the undertaking to indemnify, pay or hold harmless the
Administrative Agent or any Lender set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, the U.S.
Borrower shall make the maximum contribution to the payment and satisfaction of
each of the indemnified liabilities which is permissible under applicable law.
13.02 Right of Setoff. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence of an Event of Default, each Lender is hereby
authorized (to the extent not prohibited by applicable law) at any time or from
time to time, without presentment, demand, protest or other notice of any kind
to any Borrower or to any other Person, any such notice being hereby expressly
waived, to set off and to appropriate and apply any and all deposits (general or
special) and any other Indebtedness at any time held or owing by such Lender
(including, without limitation, by branches and agencies of such Lender wherever
located) to or for the credit or the account of any Credit Party against and on
account of the Obligations and liabilities of such Credit Party to such Lender
under this Agreement or under any of the other Credit Documents, including,
without limitation, all interests in Obligations purchased by such Lender
pursuant to Section 13.06(b), and all other claims of any nature or description
arising out of or connected with this Agreement or any other Credit Document,
irrespective of whether or not such Lender shall have made any demand hereunder
and although said Obligations, liabilities or claims, or any of them, shall be
contingent or unmatured.
13.03 Notices. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered: if to any Credit Party,
at the address specified opposite its signature below or in the other relevant
Credit Documents; if to any Lender, at its address specified on Schedule II; and
if to the Administrative Agent, at its Notice Office; or, as to any Credit Party
or the Administrative Agent, at such other address as shall be designated by
such party in a written notice to the other parties hereto and, as to each
Lender, at such other address as shall be designated by such Lender in a written
notice to the U.S. Borrower and the Administrative Agent. All such notices and
communications shall, when mailed, telegraphed, telexed, telecopied, or cabled
or sent by overnight courier, be effective (x) three Business Days after
deposited in the mails, (y) one Business Day after delivered to the telegraph
company, cable company or a recognized overnight courier, as the case may be, or
(z) when sent by telex or telecopier, except that notices and communications
to the Administrative Agent shall not be effective until received by the
Administrative Agent.
13.04 Benefit of Agreement; Assignments; Participations. (a) This
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the
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respective successors and assigns of the parties hereto; provided, however, that
no Borrower may assign or transfer any of its rights, obligations or interest
hereunder or under any Credit Document without the prior written consent of the
Administrative Agent and all the Lenders (although any German Borrower may, at
its request and with the consent of the Required Lenders, otherwise cease to be
a Borrower hereunder so long as no Default or Event of Default then exists and
all Loans incurred by such German Borrower are repaid in full and the U.S.
Borrower shall become the account party with respect to any outstanding Letters
of Credit issued for the account of such German Borrower pursuant to
documentation satisfactory to the Administrative Agent and the respective
Issuing Bank) and, provided further, that, although any Lender may transfer or
grant participations in its rights hereunder to any Eligible Transferee, such
Lender shall remain a "Lender" for all purposes hereunder (and may not transfer
or assign all or any portion of its Revolving Loan Commitments hereunder except
as provided in Section 13.04(b)) and the transferee, assignee or participant, as
the case may be, shall not constitute a "Lender" hereunder and, provided
further, that (x) each Lender which transfers or grants any participation as
contemplated above shall provide written notice to the U.S. Borrower of such
participation promptly after entering into of the respective participation
agreement and (y) no Lender shall transfer or grant any participation under
which the participant shall have rights to approve any amendment to or waiver of
this Agreement or any other Credit Document except to the extent such amendment
or waiver would extend the final scheduled maturity of any Loan, Note or Letter
of Credit (unless such Letter of Credit is not extended beyond the Revolving
Loan Maturity Date) in which such participant is participating, or reduce the
rate or extend the time of payment of interest or Fees thereon (except in
connection with a waiver of applicability of any post-default increase in
interest rates) or reduce the principal amount thereof, or increase the amount
of the participant's participation over the amount thereof then in effect (it
being understood that a waiver of any Default or Event of Default or of a
mandatory reduction in any Commitment shall not constitute a change in the terms
of such participation, and that an increase in any Commitment or Loan shall be
permitted without the consent of any participant if the participant's
participation is not increased as a result thereof). In the case of any such
participation, the participant shall not have any rights under this Agreement or
any of the other Credit Documents (the participant's rights against such Lender
in respect of such participation to be those set forth in the agreement executed
by such Lender in favor of the participant relating thereto) and the Borrowers
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement and the other Credit
Documents and all amounts payable by the Borrowers hereunder shall be determined
as if such Lender had not sold such participation.
(b) Notwithstanding the foregoing, any Lender (or any Lender
together with one or more other Lenders) may (x) assign all or a portion of its
Commitments and related outstanding Obligations (or, if the Commitments with
respect to the relevant Tranche have terminated, outstanding Obligations)
hereunder to an Eligible Transferee
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which is (i) its parent company and/or any affiliate of such Lender which is at
least 50% owned by such Lender or its parent company or to one or more Lenders
or (ii) in the case of any Lender that is a fund that invests in bank loans, any
other fund that invests in bank loans and is managed or advised by the same
investment advisor of such Lender or by an Affiliate of such investment advisor
or (y) assign all, or if less than all, a portion equal to at least $5,000,000
in the aggregate for the assigning Lender or assigning Lenders, of such
Commitments and related outstanding Obligations (or, if the Commitments with
respect to the relevant Tranche have terminated, outstanding Obligations)
hereunder to one or more Eligible Transferees, each of which assignees shall
become a party to this Agreement as a Lender by execution of an Assignment and
Assumption Agreement, provided that, (i) the assignment by any Lender of its
German Revolving Loan Sub-Commitment (or any portion thereof) shall constitute
the assignment of a like amount of such Lender's (or its respective Affiliate's)
Revolving Loan Commitment, (ii) any assignment of all or any portion of the
Revolving Loan Commitment of any Lender shall be required to be accompanied by
the assignment of all or such portions of the German Revolving Loan
Sub-Commitment and/or Non-German Revolving Loan Commitment Loan Sub-Commitment
of such Lender (or its respective Affiliate) as is equal, in the aggregate, to
the amount of the Revolving Loan Commitment being so assigned, (iii) any
assignment of all or any portion of the Revolving Loan Commitment and related
outstanding Obligations (or, if the Revolving Loan Commitment has terminated,
any assignment of Obligations originally extended pursuant to the Revolving Loan
Commitments) shall be made on a basis such that the respective assignee
participates in Revolving Loans, and in Letter of Credit Outstandings, in
accordance with the Revolving Loan Commitment (and Sub-Commitments described
above) so assigned (or if the Revolving Loan Commitment has terminated, on the
same basis as participated in by the Lenders with Revolving Loan Commitments
(and Sub-Commitments described above) prior to the termination thereof), (iv) at
such time Schedules I-A and, if applicable, I-B shall be deemed modified to
reflect the Commitments (or outstanding Term Loans, as the case may be) of such
new Lender and of the existing Lenders, (v) upon the surrender of the relevant
Notes by the assigning Lender (or, upon such assigning Lender's indemnifying the
respective Borrower for any lost Note pursuant to a customary indemnification
agreement) new Notes will be issued, at the Borrowers' expense, to such new
Lender and to the assigning Lender upon the request of such new Lender or
assigning Lender, such new Notes to be in conformity with the requirements of
Section 1.05 (with appropriate modifications) to the extent needed to reflect
the revised Commitments (or outstanding Term Loans, as the case may be), (vi)
the consent of the Administrative Agent shall be required in connection with any
assignment to an Eligible Transferee pursuant to clause (y) above, (vii) at any
time when no Event of Default is in existence, and when no Default exists
pursuant to Section 10.01 or 10.05, the approval of the U.S. Borrower shall be
required (except with respect to assignments of Loans, but not of Commitments,
pursuant to clause (x) above), which approval shall not be unreasonably withheld
or delayed (and, in instances where the approval of the U.S. Borrower is not
required, each Lender which effects any assignment as contemplated in this
Section 13.04(b) shall provide written notice to the U.S. Borrower of the
respective
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assignment promptly after entering into the respective assignment agreement),
(viii) the Administrative Agent shall receive at the time of each such
assignment, from the assigning or assignee Lender, the payment of a
non-refundable assignment fee of $3,500, and (ix) promptly after such
assignment, the Borrowers shall have received from the Administrative Agent
notice of any such assignment and of the identity, nationality and applicable
lending office of any such Eligible Transferee that is not a United States
Person (as defined in Section 7701(a)(30) of the Code), together with the copy
of the Assignment and Assumption Agreement relating thereto and, provided
further, that such transfer or assignment will not be effective until recorded
by the Administrative Agent on the Register pursuant to Section 13.15 hereof. To
the extent of any assignment pursuant to this Section 13.04(b), the assigning
Lender shall be relieved of its obligations hereunder with respect to its
assigned Commitments. At the time of each assignment pursuant to this Section
13.04(b) to a Person which is not already a Lender hereunder and which is not a
United States Person (as such term is defined in Section 7701(a)(30) of the
Code) for Federal income tax purposes, the respective assignee Lender shall, to
the extent legally entitled to do so, provide to the U.S. Borrower the Internal
Revenue Forms (and, if applicable a Section 4.04(b)(ii) Certificate) described
Section 4.04(b). To the extent that an assignment of all or any portion of a
Lender's Commitments and related outstanding Obligations pursuant to Section
1.13 or this Section 13.04(b) would, at the time of such assignment, result in
increased costs under Section 1.10, 2.06 or 4.04 in excess of those being
charged by the respective assigning Lender prior to such assignment, then the
Borrowers shall not be obligated to pay such excess increased costs (although
the Borrowers, in accordance with and pursuant to the other provisions of this
Agreement, shall be obligated to pay the costs which are not in excess of those
being charged by the respective assigning Lender prior to such assignment and
any subsequent increased costs of the type described above resulting from
changes after the date of the respective assignment).
(c) If the Gaming Authorities shall determine that any Lender does
not meet the suitability standards under the Nevada Gaming Regulations or any
other Gaming Authority with jurisdiction over the Gaming Business of the U.S.
Borrower and its Subsidiaries shall determine that any Lender does not meet its
suitability standards (in any such case, a "Former Lender"), the Administrative
Agent or the U.S. Borrower shall have the right (but not the duty) to designate
an Eligible Transferee or Transferees (in each case, a "Substitute Lender,"
which may be any Lender or Lenders that agree to become a Substitute Lender)
that has agreed to assume the rights and obligations of the Former Lender,
subject to receipt by the Administrative Agent of evidence that such Substitute
Lender is an Eligible Transferee. The Substitute Lender shall assume the rights
and obligations of the Former Lender under this Agreement, which assumption
shall become effective in accordance with, the provisions of Section 13.04(b),
provided that the purchase price to be paid by the Substitute Lender to the
Administrative Agent for the account of the Former Lender for such assumption
shall equal the sum of (i) the unpaid principal amount of any Notes held or
Loans made by the Former Lender plus accrued interest thereon plus (ii) the
Former Lender's pro rata share of the aggregate amount of
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Drawings under all Letters of Credit that have not been reimbursed by the
Borrowers, plus accrued interest thereon, plus (iii) such Former Lender's pro
rata share of accrued Fees to the date of the assumption, and, provided further,
the Borrowers shall pay all obligations owing to the Former Lender under the
Credit Documents (including all obligations, if any, owing pursuant to Section
1.11, but excluding those amounts in respect of which the purchase price is
being paid as provided above). Each Lender agrees that if it becomes a Former
Lender, upon payment to it by the Borrowers of all such amounts, if any, owing
to it under the Credit Documents, it will execute and deliver an Assignment and
Assumption Agreement, upon payment of such purchase price.
(d) Notwithstanding the provisions of subsection (c) of this
Section 13.04, if any Lender becomes a Former Lender, and if the Administrative
Agent or the U.S. Borrower fails to find a Substitute Lender pursuant to
subsection (c) of this Section within any time period specified by the
appropriate Gaming Authority for the withdrawal of a Former Lender (the
"Withdrawal Period"), the Borrowers shall, immediately (i) prepay in full the
outstanding principal amount of each Note held or Loan made by such Former
Lender, together with accrued interest thereon to the earlier of (x) the date of
payment or (y) the last day of any Withdrawal Period, and (ii) at the option of
the U.S. Borrower either (A) place an amount equal to such Former Lender's RL
Percentage or German RL Percentage as the case may be, in each Letter of Credit
in a separate cash collateral account with the Administrative Agent for each
outstanding Letter of Credit which amount will be applied by the Administrative
Agent to satisfy the respective Borrower's reimbursement obligations to the
respective Issuing Bank in respect of Drawings under the applicable Letter of
Credit or (B) if no Default or Event of Default then exists, terminate the
Revolving Loan Commitment of such Former Lender at which time the other Lenders'
RL Percentages and German RL Percentages will be automatically adjusted as a
result thereof, provided that the option specified in this clause (B) may only
be exercised if, immediately after giving effect thereto, no Lender's
outstanding Revolving Loans, when added to the product of (a) such Lender's RL
Percentage and/or German RL Percentage as the case may be, and (b) the sum of
(I) the aggregate amount of all Letter of Credit Outstandings at such time and
(II) the aggregate amount of all Swingline Loans then outstanding, would exceed
such Lender's Revolving Loan Commitments at such time.
(e) Subject to the last sentence of this Section 13.04(e), each
Lender agrees that all participations and assignments made hereunder shall be
subject to, and made in compliance with, all Gaming Regulations applicable to
lenders under this Agreement. Each Lender agrees further that it will not grant
participations or assignments prior to receiving notice from the Administrative
Agent that it has completed the primary syndication of this facility. The
Administrative Agent shall provide such notice to the Lenders promptly after
completing such primary syndication. Each Borrower hereby acknowledges that
unless the U.S. Borrower has provided the Lenders with a written opinion of
counsel as to the suitability standards applicable to lenders of any relevant
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Gaming Authority with jurisdiction over the Gaming Business of the U.S. Borrower
and its Subsidiaries, no Lender shall have the responsibility of determining
whether or not a potential assignee of such Lender would be an Eligible
Transferee under the Gaming Regulations of any such jurisdiction.
(f) Nothing in this Agreement shall prevent or prohibit any
Lender from pledging its Loans and Notes hereunder to a Federal Reserve Bank in
support of borrowings made by such Lender from such Federal Reserve Bank and,
with the consent of the Administrative Agent, any Lender which is a fund may
pledge all or any portion of its Notes or Loans to its trustee in support of its
obligations to its trustee. No pledge pursuant to this clause (f) shall release
the transferor Lender from any of its obligations hereunder.
13.05 No Waiver; Remedies Cumulative. No failure or delay on the
part of the Administrative Agent, the Collateral Agent or any Lender in
exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between any Borrower or any other Credit Party
and the Administrative Agent, the Collateral Agent or any Lender shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder or under any other Credit Document preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege hereunder or thereunder. The rights, powers and remedies herein or in
any other Credit Document expressly provided are cumulative and not exclusive of
any rights, powers or remedies which the Administrative Agent, the Collateral
Agent or any Lender would otherwise have. No notice to or demand on any Credit
Party in any case shall entitle any Credit Party to any other or further notice
or demand in similar or other circumstances or constitute a waiver of the rights
of the Administrative Agent, the Collateral Agent or any Lender to any other or
further action in any circumstances without notice or demand.
13.06 Payments Pro Rata. (a) Except as otherwise provided in this
Agreement, the Administrative Agent agrees that promptly after its receipt of
each payment from or on behalf of any Borrower in respect of any Obligations
hereunder, it shall distribute such payment to the Lenders (other than any
Lender that has consented in writing to waive its pro rata share of any such
payment) pro rata based upon their respective shares, if any, of the Obligations
with respect to which such payment was received.
(b) Each of the Lenders agrees that, if it should receive any
amount hereunder (whether by voluntary payment, by realization upon security, by
the exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise), which is applicable to the payment of the principal of, or interest
on, the Loans, Unpaid Drawings, Term Loan Commitment Commission, Revolving Loan
Commitment Commission or Letter of Credit Fees, of a sum which with respect to
the related sum or sums received by other Lenders is in a
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greater proportion than the total of such Obligation then owed and due to such
Lender bears to the total of such Obligation then owed and due to all of the
Lenders immediately prior to such receipt, then such Lender receiving such
excess payment shall purchase for cash without recourse or warranty from the
other Lenders an interest in the Obligations of the respective Credit Party to
such Lenders in such amount as shall result in a proportional participation by
all the Lenders in such amount; provided that if all or any portion of such
excess amount is thereafter recovered from such Lender, such purchase shall be
rescinded and the purchase price restored to the extent of such recovery, but
without interest.
13.07 Calculations; Computations. (a) The financial statements to
be furnished to the Lenders pursuant hereto shall be made and prepared in
accordance with GAAP, consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by the U.S. Borrower to the Lenders).
(b) Notwithstanding anything to the contrary contained in clause
(a) of this Section 13.07, (i) for purposes of determining compliance with any
incurrence tests set forth in Sections 8 and/or 9 (excluding Sections 9.08
through 9.11, inclusive), any amounts so incurred or expended (to the extent
incurred or expended in a currency other than Dollars) shall be converted into
Dollars on the basis of the Dollar Equivalent of the respective such amounts as
in effect on the date of such incurrence or expenditure under any provision of
any such Section that has an aggregate Dollar limitation provided for therein
(and to the extent the respective incurrence test regulates the aggregate amount
outstanding at any time and it is expressed in terms of Dollars, all outstanding
amounts originally incurred or spent in currencies other than Dollars shall be
converted into Dollars on the basis of the Dollar Equivalent of the respective
such amounts as in effect on the date any new incurrence or expenditures made
under any provision of any such Section that regulates the Dollar amount
outstanding at any time) and (ii) except as otherwise specifically provided
herein, all computations determining compliance with Sections 9.08 through 9.11,
inclusive, shall utilize accounting principles and policies in conformity with
those used to prepare the financial statements delivered to the Lenders pursuant
to Section 7.05(a).
(c) All computations of interest, Commitment Commission and Fees
hereunder shall be made on the basis of a year of 360 days (or 365 days in the
case of interest on Base Rate Loans) for the actual number of days (including
the first day but excluding the last day) occurring in the period for which such
interest, Commitment Commission or Fees are payable.
13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF
JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS (EXCEPT, IN THE
CASE OF OTHER CREDIT DOCUMENTS, AS SPECIFICALLY OTHERWISE PROVIDED THEREIN) AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND
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THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF
THE STATE OF NEW YORK AND APPLICABLE GAMING REGULATIONS. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE
BROUGHT IN THE COURTS OF (X) THE STATE OF NEW YORK OR OF THE UNITED STATES FOR
THE SOUTHERN DISTRICT OF NEW YORK, OR (Y) THE COURTS IN AND FOR BERLIN, GERMANY,
IN THE FEDERAL REPUBLIC OF GERMANY AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF
ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. EACH BORROWER HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH
COURTS LACK PERSONAL JURISDICTION OVER SUCH BORROWER, AND AGREES NOT TO PLEAD OR
CLAIM, IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER CREDIT DOCUMENTS BROUGHT IN ANY OF THE AFOREMENTIONED COURTS, THAT SUCH
COURTS LACK PERSONAL JURISDICTION OVER SUCH BORROWER. EACH BORROWER FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH BORROWER AT ITS ADDRESS
SET FORTH OPPOSITE ITS SIGNATURE BELOW, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS
AFTER SUCH MAILING. EACH BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO
SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD
OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER OR UNDER ANY OTHER
CREDIT DOCUMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT, ANY LENDER OR
THE HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY BORROWER IN ANY
OTHER JURISDICTION.
(b) EACH BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID
ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR
ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (A) ABOVE
AND HEREBY FURTHER IRREVOCABLY, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH
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ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
13.09 Counterparts. This Agreement may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the U.S.
Borrower and the Administrative Agent.
13.10 Effectiveness. This Agreement shall become effective on the
date (the "Effective Date") on which each Borrower, the Administrative Agent and
each of the Lenders shall have signed a counterpart hereof (whether the same or
different counterparts) and shall have delivered the same to the Administrative
Agent at its Notice Office or, in the case of the Lenders, shall have given to
the Administrative Agent telephonic (confirmed in writing), written or telex
notice (actually received) at such office that the same has been signed and
mailed to it. The Administrative Agent shall give each Borrower and each Lender
prompt written notice of the occurrence of the Effective Date.
13.11 Headings Descriptive. The headings of the several sections
and subsections of this Agreement are inserted for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Agreement.
13.12 Amendment or Waiver; etc. (a) Neither this Agreement nor any
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the respective Credit Parties party thereto and the
Required Lenders (except that additional parties may be added to, and
Subsidiaries of the U.S. Borrower may be released from, the various Guaranties
and Security Documents in accordance with the provisions thereof, without the
consent of the other Credit Parties party thereto or the Required Lenders),
provided that no such change, waiver, discharge or termination shall, without
the consent of each Lender (other than a Defaulting Lender) with Obligations
being directly modified, (i) extend the final scheduled maturity of any Loan or
Note or extend the stated expiration date of any Letter of Credit beyond the
Revolving Loan Maturity Date, or reduce the rate or extend the time of payment
of interest or Fees thereon, or reduce the principal amount thereof (except to
the extent repaid in cash), (ii) release or terminate any Guaranty provided by
the U.S. Borrower or either German Borrower, (iii) release all or substantially
all of the Collateral (except as expressly provided in the Credit
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Documents) under all the Security Documents, (iv) amend, modify or waive any
provision of this Section 13.12 (except for technical amendments with respect to
additional extensions of credit pursuant to this Agreement which afford the
protections set forth in the proviso below to such additional extensions of
credit), (v) reduce the percentage specified in the definition of Required
Lenders (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
extensions of Term Loans and Revolving Loan Commitments are included on the
Effective Date) or (vi) consent to the assignment or transfer by any Borrower of
any of its rights and obligations under this Agreement; provided further, that
no such change, waiver, discharge or termination shall (u) increase the
Commitments of any Lender over the amount thereof then in effect without the
consent of such Lender (it being understood that waivers or modifications of
conditions precedent, covenants, Defaults or Events of Default or of a mandatory
reduction in the Total Commitments shall not constitute an increase of the
Commitment of any Lender, and that an increase in the available portion of any
Commitment of any Lender shall not constitute an increase of the Commitment of
such Lender), (v) without the consent of each Issuing Bank, amend, modify or
waive any provision of Section 2 or alter its rights or obligations with respect
to Letters of Credit, (w) without the consent of the Administrative Agent,
amend, modify or waive any provision of Section 12 or any other provision as
same relates to the rights or obligations of the Administrative Agent, (x)
without the consent of the Collateral Agent, amend, modify or waive any
provision relating to the rights or obligations of the Collateral Agent, (y)
except in cases where additional extensions of term loans are being afforded
substantially the same treatment afforded to the Term Loans pursuant to this
Agreement as originally in effect and except as expressly provided in Section
4.05, without the consent of the Majority Lenders of each Tranche which is being
allocated a lesser pre-payment, repayment or commitment reduction as a result of
the actions described below (or without the consent of the Majority Lenders of
each Tranche in the case of an amendment to the definition of Majority Lenders),
amend the definition of Majority Lenders or alter the required application of
any prepayments or repayments (or commitment reductions), as between the various
Tranches, pursuant to Section 4.01 or 4.02 (excluding Section 4.02(b)) (although
the Required Lenders may waive, in whole or in part, any such prepayment,
repayment or commitment reduction, so long as the application, as amongst the
various Tranches, of any such prepayment, repayment or commitment reduction
which is still required to be made is not altered) or (z) without the consent of
the Supermajority Lenders of the respective Tranche, waive, or decrease the
amount of, any U.S. Borrower Tranche A Scheduled Repayment, German Borrower
Tranche A Scheduled Repayment, Delayed Draw Scheduled Repayment, Tranche B
Scheduled Repayment or Tranche C Scheduled Repayment or extend the date on which
the respective Scheduled Repayment is required to be made.
(b) If, in connection with any proposed change, waiver, discharge
or termination to any of the provisions of this Agreement as contemplated by
clauses (i)
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through (vi), inclusive, of the first proviso to Section 13.12(a), the consent
of the Required Lenders is obtained but the consent of one or more of such other
Lenders whose consent is required is not obtained, then the U.S. Borrower shall
have the right, so long as all non-consenting Lenders whose individual consent
is required are treated as described below, to replace each such non-consenting
Lender or Lenders (or, at the option of the U.S. Borrower if the respective
Lender's consent is required with respect to less than all Tranches of Loans (or
related Commitments), to replace only the respective Tranche or Tranches of
Commitments and/or Loans of the respective non-consenting Lender which gave rise
to the need to obtain such Lender's individual consent) with one or more
Replacement Lenders pursuant to Section 1.13 so long as at the time of such
replacement, each such Replacement Lender consents to the proposed change,
waiver, discharge or termination provided further, that in any event the U.S.
Borrower shall not have the right to replace a Lender, terminate its Revolving
Loan Commitment or repay its Loans solely as a result of the exercise of such
Lender's rights (and the withholding of any required consent by such Lender)
pursuant to the second proviso to Section 13.12(a).
13.13 Survival. All indemnities set forth herein including,
without limitation, in Sections 1.10, 1.11, 2.06, 4.04, 12.06 and 13.01 shall
survive the execution, delivery and termination of this Agreement and the Notes
and the making and repayment of the Obligations.
13.14 Domicile of Loans. Each Lender may transfer and carry its
Loans at, to or for the account of any office, Subsidiary or Affiliate of such
Lender. Notwithstanding anything to the contrary contained herein, to the extent
that a transfer of Loans pursuant to this Section 13.14 would, at the time of
such transfer, result in increased costs under Section 1.10, 1.11, 2.06 or 4.04
in excess of those being charged by the respective Lender prior to such
transfer, then the Borrowers shall not be obligated to pay such excess increased
costs (although the Borrowers, in accordance with and pursuant to the other
provisions of this Agreement, shall be obligated to pay the costs which would
apply in the absence of such designation and any subsequent increased costs of
the type described above resulting from changes after the date of the respective
transfer).
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13.15 Register. Each Borrower hereby designates the
Administrative Agent to serve as such Borrower's agent, solely for purposes of
this Section 13.15, to maintain a register (the "Register") on which it will
record the Commitments from time to time of each of the Lenders, the Loans made
by each of the Lenders and each repayment in respect of the principal amount of
the Loans of each Lender. Failure to make any such recordation, or any error in
such recordation shall not affect the respective Borrower's obligations in
respect of such Loans. With respect to any Lender, the transfer of the
Commitments of such Lender and the rights to the principal of, and interest on,
any Loan made pursuant to such Commitments shall not be effective until such
transfer is recorded on the Register maintained by the Administrative Agent with
respect to ownership of such Commitments and Loans and prior to such recordation
all amounts owing to the transferor with respect to such Commitments and Loans
shall remain owing to the transferor. The registration of assignment or transfer
of all or part of any Commitments and Loans shall be recorded by the
Administrative Agent on the Register only upon the acceptance by the
Administrative Agent of a properly executed and delivered Assignment and
Assumption Agreement pursuant to Section 13.04(b). Coincident with the delivery
of such an Assignment and Assumption Agreement to the Administrative Agent for
acceptance and registration of assignment or transfer of all or part of a Loan,
or as soon thereafter as practicable, the assigning or transferor Lender shall
surrender the Note evidencing such Loan, and thereupon one or more new Notes in
the same aggregate principal amount shall be issued to the assigning or
transferor Lender and/or the new Lender. Each Borrower jointly and severally
agrees to indemnify the Administrative Agent from and against any and all
losses, claims, damages and liabilities of whatsoever nature which may be
imposed on, asserted against or incurred by the Administrative Agent in
performing its duties under this Section 13.15.
13.16 Judgment Currency. (a) The Credit Parties' obligations
hereunder and under the other Credit Documents to make payments in the
respective Applicable Currency (the "Obligation Currency") shall not be
discharged or satisfied by any tender or recovery pursuant to any judgment
expressed in or converted into any currency other than the Obligation Currency,
except to the extent that such tender or recovery results in the effective
receipt by the Administrative Agent, the Collateral Agent or the respective
Lender of the full amount of the Obligation Currency expressed to be payable to
the Administrative Agent, the Collateral Agent or such Lender under this
Agreement or the other Credit Documents. If for the purpose of obtaining or
enforcing judgment against any Credit Party in any court or in any jurisdiction,
it becomes necessary to convert into or from any currency other than the
Obligation Currency (such other currency being hereinafter referred to as the
"Judgment Currency") an amount due in the Obligation Currency, the conversion
shall be made, at the Deutsche Mark Equivalent or the Dollar Equivalent thereof,
as the case may be, and, in the case of other currencies, the rate of exchange
(as quoted by the Administrative Agent or if the Administrative Agent does not
quote a rate of exchange on such currency, by a known dealer in such currency
designated
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by the Administrative Agent) determined, in each case, as of the day immediately
preceding the day on which the judgment is given (such Business Day being
hereinafter referred to as the "Judgment Currency Conversion Date").
(b) If there is a change in the rate of exchange prevailing
between the Judgment Currency Conversion Date and the date of actual payment of
the amount due, the Borrowers covenant and agree to pay, or cause to be paid,
such additional amounts, if any (but in any event not a lesser amount) as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the rate of exchange prevailing on the date of payment, will
produce the amount of the Obligation Currency which could have been purchased
with the amount of Judgment Currency stipulated in the judgment or judicial
award at the rate or exchange prevailing on the Judgment Currency Conversion
Date.
(c) For purposes of determining the Deutsche Mark Equivalent or
the Dollar Equivalent or any other rate of exchange for this Section, such
amounts shall include any premium and costs payable in connection with the
purchase of the Obligation Currency.
13.17 Confidentiality. (a) Subject to the provisions of clause (b)
of this Section 13.17, each Lender agrees that it will use its reasonable best
efforts not to disclose without the prior consent of the U.S. Borrower (other
than to its employees, auditors, advisors or counsel or to another Lender if the
Lender or such Lender's holding or parent company in its sole discretion
determines that any such party should have access to such information, provided
such Persons shall be subject to the provisions of this Section 13.17 to the
same extent as such Lender) any information with respect to the U.S. Borrower or
any of its Subsidiaries which is now or in the future furnished pursuant to this
Agreement or any other Credit Document, provided that any Lender may disclose
any such information (a) as has become generally available to the public other
than by virtue of a breach of this Section by such Lender, (b) to the extent
such information was legally in possession of such Lender prior to its receipt
from or on behalf of the U.S. Borrower or any of its Subsidiaries and was from a
source not known to such Lender to be (x) bound by a confidentiality agreement
with the U.S. Borrower or (y) otherwise prohibited from transmitting such
information to such Lender by a contractual, legal or fiduciary obligation, (c)
such information becomes available to such Lender from a source other than the
U.S. Borrower or any of its Subsidiaries and such source is not known to such
Lender to be (x) bound by a confidentiality agreement with the U.S. Borrower or
(y) otherwise prohibited from transmitting such information to such Lender by a
contractual, legal or fiduciary obligation, (d) as may be required or reasonably
appropriate in any report, statement or testimony submitted to, or in response
to a request from, any Gaming Authority or any municipal, state or Federal
regulatory body having or claiming to have jurisdiction over such Lender or to
the Federal Reserve Board, the Federal Deposit Insurance Corporation, the NAIC
or similar organizations (whether in the United States or
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elsewhere) or their successors, (e) as may be required or reasonably appropriate
in respect to any summons or subpoena or in connection with any litigation, (f)
in order to comply with any law, order, regulation or ruling applicable to such
Lender, (g) to the Administrative Agent or the Collateral Agent or any other
Lender, (h) to any direct or indirect contractual counterparties in swap
agreements or such contractual counterparties' professional advisors; provided
that such contractual counterparty or professional advisor to such contractual
counterparty agrees in writing to keep such information confidential to the same
extent required of the Lenders thereunder, and (i) to any prospective or actual
transferee or participant in connection with any contemplated transfer or
participation of any of the Notes or Commitments or any interest therein by such
Lender, provided, that such prospective transferee shall have agreed to be
subject to the provisions of this Section 13.17(a).
(b) Each of the Borrowers hereby acknowledge and agree that each
Lender may, in connection with the Transaction or the participation of such
Lender pursuant to this Agreement and the other Credit Documents, share with any
of its affiliates any information related to the U.S. Borrower or any of its
Subsidiaries (including, without limitation, any nonpublic customer information
regarding the creditworthiness of the U.S. Borrower and its Subsidiaries,
provided such Persons shall be subject to the provisions of this Section 13.17
to the same extent as such Lender).
13.18 Applicable Gaming Laws; Requisite Gaming Approvals. (a)
This Agreement, the Notes, the Credit Documents and the security interests
thereunder are subject to the Nevada Gaming Regulations, the Louisiana Video
Draw Poker Devices Control Law and the rules and regulations thereunder, the
Mississippi Gaming Control Act and the rules and regulations thereunder,
Missouri laws relating to licensed gaming activities and excursion gambling
boats set forth in SectionSection 313.800 et seq. of the Missouri Code and the
rules and regulations thereunder, and the applicable gaming legislation, rules
and regulations of the Federal Republic of Germany (collectively, the
"Applicable Gaming Regulations") (and each Borrower represents and warrants that
all requisite approvals thereunder have been obtained, except as specifically
contemplated by following clauses (b) and (c)), and the exercise of remedies
under the Security Documents with respect to the collateral thereunder will be
subject to the Applicable Gaming Regulations.
(b) Notwithstanding anything to the contrary contained above or
elsewhere in this Agreement or the other Credit Documents, it is understood and
agreed that (x) pursuant to Gaming Regulations as in effect in the State of
Missouri on the Initial Borrowing Date, no direct or indirect ownership interest
in a Missouri gaming licensee that is not a publicly held entity or a holding
company that is not a publicly held entity may be pledged or hypothecated in any
way (the "Missouri Equity Pledge Restrictions") and (ii) security interests in
gaming equipment located in Missouri are not permitted to be held by any entity
not licensed by the Missouri Gaming Commission. The parties hereto hereby agree
that, notwithstanding anything to the contrary contained elsewhere in this
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Agreement or in any Security Document, so long as the applicable laws and Gaming
Regulations of the State of Missouri (x) prohibit the pledge of equity interests
in any Subsidiary of the U.S. Borrower, such pledge shall not be required or (y)
prohibit the granting of security interests in gaming equipment located in
Missouri, such security interests shall not be created or deemed to exist.
However, the U.S. Borrower hereby covenants and agrees to take all action as may
be needed so that a new Wholly-Owned Domestic Subsidiary is established after
the Initial Borrowing Date, which Subsidiary (the "Missouri License Subsidiary")
shall hold all Missouri gaming licenses theretofore held, or at any time in the
future to be held, by the U.S. Borrower or any of its Subsidiaries. The Missouri
License Subsidiary may also hold any gaming equipment from time to time located
in the State of Missouri, but shall hold no assets (including capital stock of
other Persons) except to the extent solely related to the conduct of business in
the State of Missouri. Notwithstanding anything to the contrary contained
elsewhere in this Agreement or in any of the other Credit Documents, the
Missouri License Subsidiary shall conduct no business, shall engage in no
operations, and shall hold no assets except in conjunction with the Missouri
gaming licenses held by it and the gaming activities of the U.S. Borrower and
its Subsidiaries to be conducted in Missouri. The Missouri License Subsidiary
shall, to the fullest extent permitted by applicable Missouri law, enter into a
counterpart of the U.S. Subsidiaries Guaranty and the various Security Documents
(although, to the extent the granting of security interest in any collateral is
prohibited under relevant Missouri Gaming Regulations, such prohibition shall
control), and the stock of the Missouri License Subsidiary shall not be required
to be pledged to the extent such pledge is not prohibited under applicable
Missouri Gaming Regulations as in effect from time to time.
(c) Notwithstanding anything to the contrary contained above or
elsewhere in this Agreement or in the other Credit Documents, it is understood
and agreed that, in connection with (i) the pledge of the stock of, or equity
interests in, (1) Bally Gaming, Inc. and RCVP which would otherwise be required
by this Agreement and the Security Documents, the prior approval of such pledge
is required by the Mississippi Gaming Commission pursuant to the Mississippi
Gaming Control Act, (2) APT Games, Inc., Casino Electronics, Inc., Bally Gaming
International, Inc., Bally Gaming, Inc., Plantation Investments, Inc. and United
Coin Machine Co. require the prior approval of the Nevada Gaming Commission
acting upon the recommendation of the Nevada State Gaming Control Board
(collectively, the "Pledged Securities Requisite Gaming Approvals") and (ii) to
become effective, the Subsidiary Stock Restrictions require the approvals
described in the definition thereof (the "Subsidiary Stock Restrictions
Requisite Gaming Approvals"). On the Initial Borrowing Date, the U.S. Borrower
in good faith believes that it shall be able to obtain all Pledged Securities
Requisite Gaming Approvals and all Subsidiary Stock Restrictions Requisite
Gaming Approvals, and shall be able to establish the Missouri License Subsidiary
and transfer assets to it so that the only pledge of stock or equity interests
subject to the Missouri Equity Pledge Restrictions is the stock of the Missouri
License Subsidiary, in each case within 270 days after the Initial Borrowing
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Date. Notwithstanding anything to the contrary contained in this Agreement or
any other Credit Document, unless and until (x) the relevant Pledged Securities
Requisite Gaming Approvals have been obtained with respect to the pledge of the
equity interests of any entity described above, the pledge of such equity
interests shall not be required and (y) the relevant Subsidiary Stock
Restrictions Requisite Gaming Approvals have been obtained, the Subsidiary Stock
Restrictions contained in Sections 9.01 and 9.02 shall not apply (although the
provisions of Sections 3.03(g), 4.02(l) and 10.12 shall be fully effective in
accordance with the terms thereof) with the U.S. Borrower hereby representing
and warranting that no Gaming Approvals are required for the effectiveness of
said Sections in accordance with the express terms thereof). To the extent the
relevant Pledged Securities Requisite Gaming Approvals are obtained with respect
to one or more of the entities described above, the equity interests of such
entity shall, subject to the provisions of Section 8.13(b) (to the extent
applicable) promptly (and in any event within 10 days after obtaining such
approvals) be pledged pursuant to the relevant Security Documents. Furthermore,
each Borrower agrees to use its best efforts to obtain all Pledged Securities
Requisite Gaming Approvals and all Subsidiary Stock Restrictions Requisite
Gaming Approvals, and to establish the Missouri License Subsidiary in such
manner so that the Missouri Equity Pledge Restrictions apply only to the capital
stock of the Missouri License Subsidiary, in each case as promptly as is
possible after the Initial Borrowing Date.
(d) Notwithstanding anything to the contrary contained above or
elsewhere in this Agreement or any of the other Credit Documents, to the extent
any promissory note, with respect to which the payee is the U.S. Borrower, APT
Games, Inc., Casino Electronics, Inc., Bally Gaming International, Inc., Bally
Gaming, Inc., Plantation Investments, Inc. or United Coin Machine Co., that
would otherwise be required to be pledged pursuant to the U.S. Pledge Agreement
or other relevant Security Document, constitutes a "security" the pledge of
which requires the approval of the Nevada Gaming Commission acting upon the
recommendation of the Nevada State Gaming Control Board, then the respective
such promissory note shall not be required to be pledged unless and until such
approval is obtained. If at any time any promissory note of the type described
in the first sentence of this clause (d) is outstanding, the U.S. Borrower shall
notify the Administrative Agent thereof and, if requested by the Administrative
Agent, the Collateral Agent or the Required Lenders, it shall use good faith
efforts to obtain all necessary approvals to permit the pledge of such
promissory note pursuant to the terms of the relevant Security Documents. Upon
obtaining such approvals with respect to one or more promissory notes, the
respective promissory note or notes shall be immediately pledged, and delivered
for pledge, pursuant to the U.S. Pledge Agreement or other relevant Security
Document.
13.19 Gaming Authorities. The Administrative Agent and each
Lender agrees to cooperate with any Gaming Authority in connection with such
Gaming Authority's administration of its regulatory jurisdiction over the U.S.
Borrower and/or its Subsidiaries, including, without limitation, through the
provision of such documents or
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other information as may be requested by any such Gaming Authority relating to
the Administrative Agent, any Lender, the U.S. Borrower or any of its
Subsidiaries or the Documents.
13.20 Nevada Gaming Collateral. Subject to the release of any
Collateral as contemplated by any of the Documents, the Collateral Agent shall
(or through one or more of its agents, sub-agents or sub-collateral agents
shall), to the extent required by Nevada Gaming Regulations, retain possession
of all Pledged Securities delivered to it consisting of capital stock of any
Nevada gaming licensee or registered intermediary company within the State of
Nevada at a location designated to the Nevada State Gaming Control Board.
13.21 Limitation on Additional Amounts, etc. Notwithstanding
anything to the contrary contained in Section 1.10, 1.11 or 2.06 of this
Agreement, unless a Lender gives notice to the respective Borrower that it is
obligated to pay an amount under the respective Section within one year after
the later of (x) the date the Lender incurs the respective increased costs,
loss, expense or liability, reduction in amounts received or receivable or
reduction in return on capital or (y) the date such Lender has actual knowledge
of its incurrence of the respective increased costs, loss, expense or liability,
reductions in amounts received or receivable or reduction in return on capital,
then such Lender shall only be entitled to be compensated for such amount by
such Borrower pursuant to said Section 1.10, 1.11 or 2.06, as the case may be,
to the extent the costs, loss, expense or liability, reduction in amounts
received or receivable or reduction in return on capital are incurred or
suffered on or after the date which occurs one year prior to such Lender giving
notice to such Borrower that it is obligated to pay the respective amounts
pursuant to said Section 1.10, 1.11 or 2.06, as the case may be. This Section
13.21 shall have no applicability to any Section of this Agreement other than
said Sections 1.10, 1.11 or 2.06.
13.22 Power of Attorney. Each of the Administrative Agent and the
Collateral Agent is hereby authorized by, and on behalf of, each Lender to enter
into any Security Document required to be executed and delivered pursuant to
this Agreement or the other Credit Documents in order to secure the obligations
of the Borrowers and Guarantors hereunder and thereunder. In addition, the
Administrative Agent shall be authorized to execute on behalf of each Lender the
German Security Documents and the German Subsidiaries Guaranty. The
Administrative Agent and the Collateral Agent shall be entitled to all
declarations it considers necessary or useful in connection with the
aforementioned matters. The Administrative Agent and the Collateral Agent shall
further be entitled to rescind, amend and/or execute new and different version
of before-mentioned documents. Each Lender hereby grants to each of the
Administrative Agent and the Collateral Agent an irrevocable power-of-attorney,
in such Lender's name, to take the actions contemplated above in this Section
13.22.
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13.23 Post Closing Actions. Notwithstanding anything to the
contrary contained in this Agreement or the other Credit Documents, the parties
hereto acknowledge and agree that:
(a) Filing of Financing Statements. The U.S. Borrower and its
Subsidiaries shall be required to cause the filing of all financing statements
(on Form UCC-1 or other appropriate form) in the relevant filing offices within
ten (10) days after the Initial Borrowing Date, but shall not be required to
have same filed on the Initial Borrowing Date;
(b) Filing of Credit Documents. The U.S. Borrower shall, or shall
cause, a loan report and any required Credit Documents to be filed with the
Mississippi Gaming Commission and the Nevada Gaming Commission, in each case
within 30 days (or 5 days in the case of the Nevada Gaming Commission) after the
Initial Borrowing Date.
(c) Bailee Agreements. Although a Bailee Agreement shall be
required to be executed and delivered on the Initial Borrowing Date by the
trustee pursuant to the Existing Senior Secured Notes Indenture, the sub-agent
of such trustee which holds collateral in the State of Nevada shall not be
required to execute or deliver a Bailee Agreement on the Initial Borrowing Date.
Within 10 Business Days after the Initial Borrowing Date, a copy of the executed
Bailee Agreement with the trustee pursuant to the Existing Senior Secured Notes
Indenture shall be sent to such sub-agent, with a notice, in form and substance
reasonably satisfactory to the Collateral Agent, informing the sub-agent that
all collateral held by it is subject to the Bailee Agreement and the security
interests (subject to the provisions of Section 13.18) created pursuant to the
Security Documents.
(d) Surveys. To the extent any survey otherwise meeting the
requirements of Section 5A.16(iii) is not available with respect to any
Mortgaged Property on the Initial Borrowing Date, such survey shall instead be
required to be delivered within 60 days after the Initial Borrowing Date.
(e) RCVP Actions. If the Delayed Draw Term Loans are incurred on,
or within one week after, the Initial Borrowing Date, then all conditions set
forth in Section 5B shall be satisfied on the Initial Delayed Draw Term Loan
Borrowing Date, except that the actions specified in the third and fourth
sentences of Section 5B.03 and the related opinions of counsel with respect to
such actions which would be required pursuant to Section 5B.04, shall instead be
required to be completed, to the satisfaction of the Collateral Agent, and to
the extent requested by the Administrative Agent, the Collateral Agent or the
Required Lenders as otherwise provided in Section 5B, within 60 days after the
Initial Delayed Draw Term Loan Borrowing Date.
(f) Pledge of Specified Inactive Susidiary Stock. The capital
stock of
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specified inactive subsidiaries shall not be required to be pledged, or
delivered for pledge, on the Initial Borrowing Date; provided that, to the
extent the respective specified Inactive Subsidiary remains in existence on the
60th day after the Initial Borrowing Date, all capital stock thereof owned by
the U.S. Borrower and its subsidiaries shall be pledged, and delivered to the
Collateral Agent for pledge, in accordance with the requirements of the U.S.
Pledge Agreement or other relevant Security Documents.
All conditions precedent and representations contained in this
Agreement and the other Credit Documents shall be deemed modified to the extent
necessary to effect the foregoing (and to permit the taking of the actions
described above within the time periods required above, rather than as elsewhere
provided in the Credit Documents); provided, that (x) to the extent any
representation and warranty would not be true because the foregoing actions were
not taken on the Initial Borrowing Date, the respective representation and
warranty shall be required to be true and correct in all material respects at
the time the respective action is taken (or was required to be taken) in
accordance with the foregoing provisions of this Section 13.23 and (y) all
representations and warranties relating to the Security Documents shall be
required to be true immediately after the actions required to be taken by
Section 13.23 have been taken (or were required to be taken). The acceptance of
the benefits of each Credit Event shall constitute a representation, warranty
and covenant by the Borrowers to each of the Lenders that the actions required
pursuant to this Section 13.23 will be, or have been, taken within the relevant
time periods referred to in this Section 13.23 and that, at such time, all
representations and warranties contained in this Agreement and the other Credit
Documents shall then be true and correct without any modification pursuant to
this Section 13.23, the parties hereto acknowledge and agree that the failure to
take any of the actions required above, within the relevant time periods
required above, shall give rise to an immediate Event of Default pursuant to
this Agreement.
13.24 Specific Provisions Regarding German Borrowers. It is
agreed and acknowledged by the parties hereto that Bally Wulff Automaten and
Bally Wulff Vertriebs regularly and customarily use the management services
(including, inter alia, financial management and cash management services) of
their common parent, Alliance Automaten GmbH & Co. KG. The parties hereto
therefore agree and acknowledge that Bally Wulff Automaten and Bally Wulff
Vertriebs coordinate their borrowings hereunder through Alliance Automaten GmbH
& Co. KG and that Alliance Automaten GmbH & Co. KG shall have the authority to
give any notice of borrowing or any other notice or communication hereunder on
behalf of, and with legally binding effect on, Bally Wulff Automaten and Bally
Wulff Vertriebs.
13.25 Specific Provisions Regarding BGI Chattel Paper. It is
acknowledged and agreed by the parties hereto that, notwithstanding anything to
the contrary contained in this Agreement or any other Credit Document, BGI
Chattel Paper shall not be required to be delivered to the Collateral Agent (or
any sub-agent of the
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Collateral Agent). Notwithstanding the foregoing, if a Specified Default (as
defined in the U.S. Security Agreement) has occurred and is continuing at any
time, then the Administrative Agent, the Collateral Agent or the Required
Lenders may require that all BGI Chattel Paper be delivered to the Collateral
Agent or a sub-agent designated by it (in which case the U.S. Borrower shall
cause all BGI Chattel Paper to be so deliv- ered). Furthermore, the fact that
BGI Chattel Paper need not be delivered to the Collateral Agent at a given time
as a result of the provisions of this Section 13.25 shall in no way alter the
requirement that a perfected security interest be granted therein pursuant to
the U.S. Security Agreement or the requirement that all appropriate filings
under the Uniform Commercial Code of the relevant jurisdictions be made and
maintained so that such a perfected security interest at all times exists in
favor of the Collateral Agent with respect to the BGI Chattel Paper.
Furthermore, if requested by the Administrative Agent or the Collateral Agent,
the U.S. Borrower shall cause all BGI Chattel Paper to be stamped with a legend
indicating that it is subject to the security interests created pursuant to the
U.S. Security Agreement.
13.26 Special Provisions Regarding United Coin Machine Notes. It
is acknowledged and agreed by the parties hereto that no United Coin Machine
Notes shall be pledged, or delivered for pledge, on the Initial Borrowing Date.
The U.S. Borrower shall, and shall cause United Coin Machine Co. to, take all
actions so that, not later than 90 days after the Initial Borrowing Date, all
United Coin Machine Notes shall be pledged, and delivered for pledge, to the
Collateral Agent (or a sub-agent designated by the Collateral Agent located in
the State of Nevada) pursuant to the U.S. Pledge Agreement; provided that the
parties hereto acknowledge and agree that the ability of the Collateral Agent to
foreclose on United Coin Machine Percentage Notes may be subject to licensing or
other necessary approvals pursuant to Applicable Gaming Regulations. It is
further understood and agreed that, with respect to all United Coin Machine
Notes required to be pledged pursuant to the immediately preceding sentence (or
thereafter acquired), all such United Coin Machine Notes shall be delivered on a
weekly or a monthly, as agreed with the Collateral Agent, to a sub-agent
designated by the Collateral Agent located in the State of Nevada.
Notwithstanding anything to the contrary contained above, it shall not
constitute a breach or violation of this Agreement or any related Credit
Document if at any time less than $500,000 in aggregate principal amount of
outstanding United Coin Machine Notes which are otherwise required to be pledged
pursuant to the U.S. Pledge Agreement (and in accordance with the provisions of
this Section 13.26) have not been delivered for pledge pursuant thereto
(although the U.S. Borrower and its Subsidiaries shall use good faith efforts to
deliver said promissory notes on a weekly or monthly basis as agreed with the
Collateral Agent as provided above).
13.27 Override Provisions Regarding Margin Stock. Notwithstanding
anything to the contrary contained in this Agreement or any other Credit
Document, the parties hereto acknowledge and agree that, so long as the
aggregate fair market value of all Margin Stock owned by the U.S. Borrower and
its Subsidiaries does not exceed
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$100,000, such Margin Stock shall not be required to be pledged, or delivered
for pledge, pursuant to any Security Document. If at any time the aggregate fair
market value of all Margin Stock owned by the U.S. Borrower and its Subsidiaries
exceeds $100,000, then all Margin Stock owned by the U.S. Borrower and its
Subsidiaries shall be pledged, and delivered for pledge, to the extent otherwise
required by the terms of this Agreement and the various Security Documents and,
in connection therewith, the U.S. Borrower will, or will cause to be taken, all
actions required pursuant to Section 8.15.
SECTION 14. Parent Guaranty.
14.01 The Parent Guaranty. In order to induce the Lenders to
enter into this Agreement and to extend credit hereunder and in recognition of
the direct benefits to be received by the Parent Guarantor from the proceeds of
the Loans extended to the German Borrowers and the issuance of the Letters of
Credit for the account of the German Borrowers, the Parent Guarantor hereby
agrees with the Lenders as follows: the Parent Guarantor hereby unconditionally
and irrevocably guarantees as primary obligor and not merely as surety the full
and prompt payment when due, whether upon maturity, by acceleration or
otherwise, of any and all Guaranteed Obligations of each German Borrower to the
Guaranteed Creditors. If any or all of the Guaranteed Obligations of any German
Borrower to the Guaranteed Creditors becomes due and payable hereunder, the
Parent Guarantor unconditionally promises to pay such indebtedness to the
Lenders, or order, on demand, together with any and all reasonable expenses
which may be incurred by the Guaranteed Creditors (or the Administrative Agent
or Collateral Agent) in collecting any of the Guaranteed Obligations. If claim
is ever made on upon any Guaranteed Creditor for repayment or recovery of any
amount or amounts received in payment or on account of any of the Guaranteed
Obligations and any of the aforesaid payees repays all or part of said amount by
reason of (i) any judgment, decree or order of any court or administrative body
having jurisdiction over such payee or any of its property or (ii) any
settlement or compromise of any such claim effected by such payee with any such
claimant (including the German Borrowers), then and in such event the Parent
Guarantor agrees that any such judgment, decree, order, settlement or compromise
shall be binding upon the Parent Guarantor, notwithstanding any revocation of
this Parent Guaranty or any other instrument evidencing any liability of the
German Borrowers, and the Parent Guarantor shall be and remain liable to the
aforesaid payees hereunder for the amount so repaid or recovered to the same
extent as if such an amount had never originally been received by any such
payee.
14.02 Bankruptcy. Additionally, the Parent Guarantor
unconditionally and irrevocably guarantees the payment of any and all of the
Guaranteed Obligations of each German Borrower to the Guaranteed Creditors
whether or not due or payable by the respective German Borrower upon the
occurrence in respect of any Borrower of any of the events specified in Section
10.05, and unconditionally and irrevocably promises to pay such indebtedness to
the Guaranteed Creditors, or order, on demand, in lawful money of
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the United States.
14.03 Nature of Liability. The liability of the Parent Guarantor
hereunder is exclusive and independent of any security for or other guaranty of
the indebtedness of either German Borrower whether executed by the Parent
Guarantor, any other guarantor or by any other party, and the liability of the
Parent Guarantor hereunder shall not be affected or impaired by (a) any
direction as to application of payment by either German Borrower or by any other
party, or (b) any other continuing or other guaranty, undertaking or maximum
liability of a guarantor or of any other party as to the indebtedness of either
German Borrower, or (c) any payment on or in reduction of any such other
guaranty or undertaking, or (d) any dissolution, termination or increase,
decrease or change in personnel by either German Borrower, or (e) any payment
made to the Administrative Agent or the Guaranteed Creditors on the indebtedness
which such Administrative Agent or such Guaranteed Creditor repays either German
Borrower pursuant to court order in any bankruptcy, reorganization, arrangement,
moratorium or other debtor relief proceeding, and the Parent Guarantor waives
any right to the deferral or modification of its obligations hereunder by reason
of any such proceeding.
14.04 Independent Obligation. The obligations of the Parent
Guarantor hereunder are independent of the obligations of any other guarantor or
the German Borrowers, and a separate action or actions may be brought and
prosecuted against the Parent Guarantor whether or not action is brought against
any other guarantor or either German Borrower and whether or not any other
guarantor or either German Borrower be joined in any such action or actions. The
Parent Guarantor waives, to the fullest extent permitted by law, the benefit of
any statute of limitations affecting its liability hereunder or the enforcement
thereof. Any payment by the respective German Borrower or other circumstance
which operates to toll any statute of limitations as to either German Borrower
shall, to the fullest extent permitted by law, operate to toll the statute of
limitations as to the Parent Guarantor.
14.05 Authorization. The Parent Guarantor authorizes the
Administrative Agent and the Guaranteed Creditors without notice or demand
(except as shall be required by applicable statute and cannot be waived), and
without affecting or impairing its liability hereunder, from time to time to:
(a) subject to the agreement of the respective German Borrower,
change the manner, place or terms of payment of, and/or change or extend
the time of payment of, renew, increase, accelerate or alter, any of the
indebtedness (including any increase or decrease in the rate of interest
thereon), any security therefor, or any liability incurred directly or
indirectly in respect thereof, and the Parent Guaranty herein made shall
apply to the indebtedness as so changed, extended, renewed or altered;
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(b) take and hold security for the payment of the indebtedness
and sell, exchange, release, surrender, realize upon or otherwise deal
with in any manner and in any order any property by whomsoever at any
time pledged or mortgaged to secure, or howsoever securing, the
indebtedness or any liabilities (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and/or any
offset thereagainst;
(c) exercise or refrain from exercising any rights against the
German Borrowers or others or otherwise act or refrain from acting;
(d) release or substitute any one or more endorsers, guarantors,
the German Borrowers or other obligors;
(e) settle or compromise any of the indebtedness, any security
therefor or any liability (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and may subordinate
the payment of all or any part thereof to the payment of any liability
(whether due or not) of the German Borrowers to their creditors other
than the Lenders;
(f) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of a German Borrower to the Banks
regardless of what liability or liabilities of the Parent Guarantor or
the German Borrowers remain unpaid; and/or
(g) consent to or waive any breach of, or any act, omission or
default under, this Agreement or any of the instruments or agreements
referred to herein, or otherwise, with the agreements required pursuant
to Section 13.12, amend, modify or supplement this Agreement or any of
such other instruments or agreements.
14.06 Reliance. It is not necessary for the Administrative Agent
or any Guaranteed Creditors to inquire into the capacity or powers of either
German Borrower or its Subsidiaries or the officers, directors, partners or
agent acting or purporting to act on its behalf, and any indebtedness made or
created in reliance upon the professed exercise of such powers shall be
guaranteed hereunder.
14.07 Subordination. Any indebtedness of a German Borrower now or
hereafter owing to the Parent Guarantor is hereby subordinated in right of
payment to the indebtedness of the respective German Borrower owing to the
Administrative Agent and the Guaranteed Creditors; provided that payment may be
made by the respective German Borrower on any such indebtedness owing to the
Parent Guarantor so long as the same is not prohibited by this Agreement; and
provided further, that if the Administrative Agent so requests at a time when an
Event of Default exists, all such indebtedness of the German
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Borrowers to the Parent Guarantor shall be collected, enforced and received by
the Parent Guarantor as trustee for the Guaranteed Creditors and be paid over to
the Guaranteed Creditors on account of the indebtedness of the respective German
Borrower to the Guaranteed Creditors, but without affecting or impairing in any
manner the liability of the Parent Guarantor under the other provisions of this
Parent Guaranty. Prior to the transfer by the Parent Guarantor of any note or
negotiable instrument evidencing any indebtedness of a German Borrower to the
Parent Guarantor, the Parent Guarantor shall mark such note or negotiable
instrument with a legend that the same is subject to this subordination.
14.08 Waiver. (a) The Parent Guarantor waives any right (except
as shall be required by applicable statute and cannot be waived) to require the
Administrative Agent or the Guaranteed Creditors to (i) proceed against either
German Borrower, any other guarantor or any other party, (ii) proceed against or
exhaust any security held from either German Borrower, any other guarantor or
any other party or (iii) pursue any other remedy in the Administrative Agent's
or the Guaranteed Creditors' power whatsoever. The Parent Guarantor waives any
defense based on or arising out of any defense of either German Borrower, any
other guarantor or any other party other than payment in full of the
indebtedness, including, without limitation, any defense based on or arising out
of the disability of either German Borrower, any other guarantor or any other
party, or the unenforceability of the indebtedness or any part thereof from any
cause, or the cessation from any cause of the liability of either German
Borrower other than payment in full of the indebtedness. The Administrative
Agent and the Guaranteed Creditors may, at their election, foreclose on any
security held by the Administrative Agent, the Collateral Agent or the
Guaranteed Creditors by one or more judicial or nonjudicial sales, whether or
not every aspect of any such sale is commercially reasonable (to the extent such
sale is permitted by applicable law), or exercise any other right or remedy the
Administrative Agent and the Guaranteed Creditors may have against either German
Borrower or any other party, or any security, without affecting or impairing in
any way the liability of the Parent Guarantor hereunder except to the extent the
indebtedness has been paid. The Parent Guarantor waives, to the fullest extent
permitted by law, any defense arising out of any such election by the
Administrative Agent and the Guaranteed Creditors, even though such election
operates to impair or extinguish any right of reimbursement or subrogation or
other right or remedy of the Parent Guarantor against any German Borrower or any
other party or any security.
(b) The Parent Guarantor waives all presentments, demands for
performance, protests and notices, including without limitation notices of
nonperformance, notices of protest, notices of dishonor, notices of acceptance
of this Parent Guaranty, and notices of the existence, creation or incurring of
new or additional indebtedness. The Parent Guarantor assumes all responsibility
for being and keeping itself informed of each German Borrower's financial
condition and assets, and of all other circumstances bearing upon the risk of
nonpayment of the indebtedness and the nature, scope and extent of the risks
which the Parent Guarantor assumes and incurs hereunder, and agrees that the
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Administrative Agent and the Guaranteed Creditors shall have no duty to advise
the Parent Guarantor of information known to them regarding such circumstances
or risks.
14.09 Limitation on Enforcement. The Guaranteed Creditors agree
that this Parent Guaranty may be enforced only by the action of the
Administrative Agent or the Collateral Agent, in each case acting upon the
instructions of the Required Lenders and that no Guaranteed Creditors shall have
any right individually to seek to enforce or to enforce this Parent Guaranty, it
being understood and agreed that such rights and remedies may be exercised by
the Administrative Agent for the benefit of the Guaranteed Creditors upon the
terms of this Agreement. The Guaranteed Creditors further agree that this Parent
Guaranty may not be enforced against any Affiliate, director, officer, employee
or stockholder of the Parent Guarantor.
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IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
<TABLE>
<CAPTION>
Address:
- --------
<S> <C>
6601 South Bermuda Road ALLIANCE GAMING CORPORATION
Las Vegas, Nevada 89119
Attention: Scott Schweinfurth
Telephone No.: (702) 896-7700 By __________________________________
Telecopier No.: (702) 263-5636 Name:
Title:
6601 South Bermuda Road BALLY WULFF VERTRIEBS GMBH
Las Vegas, Nevada 89119
Attention: Scott Schweinfurth
Telephone No.: (702) 896-7700 By __________________________________
Telecopier No.: (702) 263-5636 Name:
Title:
6601 South Bermuda Road BALLY WULFF AUTOMATEN GMBH
Las Vegas, Nevada 89119
Attention: Scott Schweinfurth
Telephone No.: (702) 896-7700 By __________________________________
Telecopier No.: (702) 263-5636 Name:
Title:
</TABLE>
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<PAGE> 217
<TABLE>
<S> <C>
Eleven Madison Avenue CREDIT SUISSE FIRST BOSTON,
New York, New York 10010 Individually and as Administrative
Attention: Ed Barr Agent
Telephone No.: (212) 325-9151
Telecopier No.: (212) 325-8309 By __________________________________
Name:
Title:
By __________________________________
Name:
Title:
</TABLE>
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<PAGE> 218
SCHEDULE I-A
COMMITMENTS
<TABLE>
<CAPTION>
Tranche A Delayed Draw Tranche B Tranche C
Term Loan Term Loan Term Loan Term Loan Revolving Loan
Lender Commitment Commitment Commitment Commitment Commitment
- ------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Credit Suisse $0.00 $11,428,571.43 $37,885,714.29 $18,285,714.28 $22,500,000.00
First Boston
The Bank of
Nova Scotia $0.00 $0.00 $0.00 $0.00 $22,500,000.00
Southern Pacific
Thrift & Loan
Association $0.00 $0.00 $0.00 $0.00 $15,000,000.00
The Mitsubishi
Trust and Banking
Corporation $0.00 $0.00 $0.00 $0.00 $15,000,000.00
Sumitomo Bank of
California $0.00 $0.00 $0.00 $0.00 $15,000,000.00
Merrill Lynch
Senior Floating
Rate Fund, Inc. $0.00 $2,678,571.43 $8,035,714.29 $4,285,714.28 $0.00
MassMutual Life $0.00 $2,142,857.14 $6,428,571.43 $3,428,571.43 $0.00
Insurance Co.
Van Kampen American $0.00 $2,142,857.14 $6,428,571.43 $3,428,571.43 $0.00
Prime Rate Income Trust
Prime Income Trust $0.00 $1,428,571.43 $4,285,714.28 $2,285,714.29 $0.00
Royalton Company $0.00 $1,250,000.00 $3,750,000.00 $2,000,000.00 $0.00
CIBC Inc. $0.00 $1,071,428.57 $3,214,285.71 $1,714,285.72 $0.00
KZH-ING-1 Corporation, Inc. $0.00 $1,071,428.58 $3,214,285.71 $1,714,285.71 $0.00
Crescent/Mach I
Partners, L.P. $0.00 $714,285.71 $342,857.15 $1,142,857.14 $0.00
KZH-Crescent $0.00 $714,285.71 $342,857.14 $1,142,857.15 $0.00
Corporation
Deeprock & Company $0.00 $357,142.86 $1,071,428.57 $571,428.57 $0.00
------------- -------------- -------------- -------------- --------------
TOTAL: $0.00 $25,000,000 $75,000,000 $40,000,000 $90,000,000
</TABLE>
<PAGE> 219
SCHEDULE I-B
GERMAN REVOLVING LOAN SUB-COMMITMENTS
<TABLE>
<CAPTION>
German Revolving Loan
German Revolving Lender Sub-Commitments
- ----------------------- ---------------
<S> <C>
Credit Suisse First Boston $16,500,000.00
The Bank of Nova Scotia $16,500,000.00
The Mitsubishi Trust and Banking Corporation $11,000,000.00
Sumitomo Bank of California $11,000,000.00
--------------
TOTAL: $55,000,000
</TABLE>
<PAGE> 220
SCHEDULE II
LENDER ADDRESSES AND APPLICABLE LENDING OFFICES
Credit Suisse First Boston Eleven Madison Avenue
New York, New York 10010
Telephone No.: (212) 325-9151
Facsimile No.: (212) 325-8309
Attention: Ed Barr
The Bank of Nova Scotia One Liberty Plaza
New York, New York 10006
Telephone No.: (212) 225-5009
Facsimile No.: (212) 225-5090
Attention: John Hopmans
Southern Pacific Thrift & Loan 12300 Wilshire Boulevard
Suite 200
Los Angeles, California 90025
Telephone No.: (310) 442-3315
Facsimile No.: (310) 707-4067
Attention: Chuck Martorano
Mitsubishi Trust and Banking 801 South Figuero Street
Suite 500
Los Angeles, California
Telephone No.: (213) 896-4666
Facsimile No.: (213) 687-4639
Attention: Dean Kawai
Sumitomo Bank of California 611 West 6th Street
Suite 3900
Los Angeles, California
Telephone No.: (213) 362-5715
Facsimile No.: (213) 622-1385
Attention: Steven Sloan
Merrill Lynch Senior Floating Rate Fund, Inc. 800 Scudders Mill Road
Plainsboro, New Jersey 08536
Telephone No.: (609) 282-2092
Facsimile No.: (609) 282-2550
Attention: Anthony Clemente
<PAGE> 221
SCHEDULE II
Page 2
Deeproch & Company 24 Federal Street
Boston, Massachusetts
Telephone No.: (617) 348-0115
Facsimile No.: (617) 695-9594
Attention: Juliana Riley
KZH-ING-1 Corporation, Inc. 333 South Grand Avenue
Suite 400
Los Angeles, California 90071
Telephone No.: (213) 396-3972
Facsimile No.: (213) 626-6552
Attention: Michael Hattley
CIBC Inc. 425 Lexington Avenue
7th Floor
New York, New York 10017
Telephone No.: (212) 856-3768
Facsimile No.: (212) 856-3799
Attention: Elizabeth Schreiber
Massachussetts Mutual Life Insurance Co. 1295 State Street
Springfield, Massachusetts 01111
Telephone No.: (413) 744-6228
Facsimile No.: (413) 744-6127
Attention: John Mecler
Prime Income Trust Two World Trade Center
72nd Floor
New York, New York 10048
Telephone No.: (212) 392-5845
Facsimile No.: (212) 392-5345
Attention: Louis Pistecchia
Van Kampen American Capital Prime Rate Income Trust
One Parkview Plaza
Oakbrook Terrace, Illinois
Telephone No.: (630) 684-6438
Facsimile No.: (630) 684-6740
Attention: Jeffrey Maillet
<PAGE> 222
SCHEDULE II
Page 3
Crescent/Mach I Partners, L.P. 333 South Grand Avenue
Suite 400
Los Angeles, California 90071
Telephone No.: (213) 346-3972
Facsimile No.: (213) 626-6552
Attention: Michael Hattley
KZH-Crescent Corporation 333 South Grand Avenue
Suite 400
Los Angeles, California 90071
Telephone No.: (213) 346-3972
Facsimile No.: (213) 626-6552
Attention: Michael Hattley
Royalton Company 840 Newport Center Drive
Newport Beach, California 92658
Telephone No.: (714) 640-3407
Facsimile No.: (714) 725-6839
Attention: Jason Rosiak
<PAGE> 223
EXHIBIT A
<PAGE> 224
EXHIBIT A
FORM OF NOTICE OF BORROWING
[Date]
Credit Suisse First Boston, as Administrative Agent
for the Banks party to the Credit Agreement
referred to below
Eleven Madison Avenue
New York, NY 10010
Attention:
Ladies and Gentlemen:
The undersigned, [Name of Borrower] (the "Borrower"), refers to the
Credit Agreement, dated as of August 8, 1997 (as amended from time to time, the
"Credit Agreement", the terms defined therein being used herein as therein
defined), among Alliance Gaming Corporation, Bally Wulff Automaten GmbH, Bally
Wulff Vertriebs GmbH, various lenders from time to time party thereto (the
"Lenders"), and you, as Administrative Agent for such Lenders, and hereby gives
you notice, irrevocably, pursuant to Section 1.03(a) of the Credit Agreement,
that the undersigned hereby requests a Borrowing under the Credit Agreement, and
in that connection sets forth below the information relating to such Borrowing
(the "Proposed Borrowing") as required by Section 1.03(a) of the Credit
Agreement:
(i) The Business Day of the Proposed Borrowing is________ ,
19___.(1)
(ii) The Proposed Borrowing shall consist of [U.S. Borrower
Tranche A Loans] [German Borrower Tranche A Term Loans] [Delayed Draw
Term Loans] [Tranche B Term Loans] [Tranche C Term Loans] [Dollar
Revolving Loans] [Deutsche Mark Revolving Loans].
- ----------
(1) Shall be a Business Day at least one Business Day in the case of Base Rate
Loans and three Business Days in the case of Euro Rate Loans, in each case after
the date hereof.
<PAGE> 225
EXHIBIT A
Page 2
(iii) The aggregate principal amount of the Proposed Borrowing
is __________.(2)
[(iv) The Dollar Loans to be made pursuant to the Proposed
Borrowing shall be initially maintained as [Base Rate Loans]
[Eurodollar Loans].(3)
[(iv)/(v) The initial Interest Period for the Proposed
Borrowing is month(s).(4)
The undersigned hereby certifies that the following statements are true
and correct on the date hereof, and will be true and correct on the date of the
Proposed Borrowing:
(A) the representations and warranties contained in the Credit
Agreement and in the other Credit Documents are and will be true and
correct in all material respects, both before and after giving effect
to the Proposed Borrowing and to the application of the proceeds
thereof, as though made on such date (it being understood and agreed
that any representation or warranty which by its terms is made as of a
specified date shall be required to be true and correct in all material
respects only as of such specified date); and
(B) no Default or Event of Default has occurred and is
continuing, or would result from such Proposed Borrowing or from the
application of the proceeds thereof.
Very truly yours,
[NAME OF BORROWER(S)]
By__________________________
Title:
- ----------
(2) Stated in the Applicable Currency.
(3) To be included for a Proposed Borrowing of Dollar Loans.
(4) To be included for a Proposed Borrowing of Euro Rate Loans.
<PAGE> 226
EXHIBIT B
<PAGE> 227
EXHIBIT B-1
<PAGE> 228
EXHIBIT B-1
FORM OF U.S. BORROWER TRANCHE A TERM NOTE
$_____________ New York, New York
_______ ___, 199_
FOR VALUE RECEIVED, ALLIANCE GAMING CORPORATION, a Nevada corporation
(the "Borrower"), hereby promises to pay to the order of __________ (the
"Lender"), in lawful money of the United States of America in immediately
available funds, at the appropriate Payment Office (as defined in the Agreement
referred to below) of Credit Suisse First Boston (the "Administrative Agent") on
the Tranche A Term Loan Maturity Date (as defined in the Agreement) the
principal sum of ______________________ DOLLARS ($__________) or, if less, the
unpaid principal amount of the U.S. Borrower Tranche A Term Loans (as defined in
the Agreement) made by the Lender pursuant to the Agreement.
The Borrower promises also to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates and at the times provided in Section 1.08 of the Agreement.
This Note is one of the U.S. Borrower Tranche A Term Notes referred to
in the Credit Agreement, dated as of August 8, 1997, among the Borrower, Bally
Wulff Vertriebs GmbH, Bally Wulff Automaten GmbH, the lenders from time to time
party thereto (including the Lender), and the Administrative Agent (as amended,
modified or supplemented from time to time, the "Agreement") and is entitled to
the benefits thereof and of the other Credit Documents (as defined in the
Agreement). This Note is secured by certain of the Security Documents (as
defined in the Agreement) and is entitled to the benefits of certain of the
Guaranties (as defined in the Agreement). This Note is subject to voluntary
prepayment and mandatory repayment prior to the Tranche A Term Loan Maturity
Date, in whole or in part, as provided in the Agreement.
In case an Event of Default (as defined in the Agreement) shall occur
and be continuing, the principal of and accrued interest on this Note may be
declared to be due and payable in the manner and with the effect provided in the
Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
ALLIANCE GAMING CORPORATION
By________________________________
Title:
<PAGE> 229
EXHIBIT B-2
<PAGE> 230
EXHIBIT B-2
FORM OF GERMAN BORROWER TRANCHE A TERM NOTE
DM_____________ New York, New York
_______ ___, 199_
FOR VALUE RECEIVED, BALLY WULFF VERTRIEBS GMBH, a company with limited
liability organized under the laws of the Federal Republic of Germany ("BWV"),
and BALLY WULFF AUTOMATEN GMBH, a company with limited liability organized under
the laws of the Federal Republic of Germany ("BWA" and, together with BWV, each
a "Borrower" and, collectively, the "Borrowers"), hereby jointly and severally
promise to pay to the order of __________ (the "Lender"), in lawful money of the
Federal Republic of Germany in immediately available funds, at the appropriate
Payment Office (as defined in the Agreement referred to below) of Credit Suisse
First Boston (the "Administrative Agent") on the Tranche A Term Loan Maturity
Date (as defined in the Agreement), the principal sum of ____________________
DEUTSCHE MARKS (DM__________) or, if less, the unpaid principal amount of the
German Borrower Tranche A Term Loans (as defined in the Agreement) made by the
Lender pursuant to the Agreement.
The Borrowers also jointly and severally promise to pay interest on the
unpaid principal amount hereof in like money at said office from the date hereof
until paid at the rates and at the times provided in Section 1.08 of the
Agreement.
This Note is one of the German Borrower Tranche A Term Notes referred
to in the Credit Agreement, dated as of August 8, 1997, among Alliance Gaming
Corporation, the Borrowers, the lenders from time to time party thereto
(including the Lender), and the Administrative Agent (as amended, modified or
supplemented from time to time, the "Agreement") and is entitled to the benefits
thereof and of the other Credit Documents (as defined in the Agreement). This
Note is secured by certain of the Security Documents (as defined in the
Agreement) and is entitled to the benefits of certain of the Guaranties (as
defined in the Agreement). This Note is subject to voluntary prepayment and
mandatory repayment prior to the Tranche A Term Loan Maturity Date, in whole or
in part, as provided in the Agreement.
In case an Event of Default (as defined in the Agreement) shall occur
and be continuing, the principal of and accrued interest on this Note may be
declared to be due and payable in the manner and with the effect provided in the
Agreement.
The Borrowers hereby waive presentment, demand, protest or notice of
any kind in connection with this Note.
<PAGE> 231
EXHIBIT B-2
Page 2
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
BALLY WULFF VERTRIEBS GMBH
By________________________________
Title:
BALLY WULFF AUTOMATEN GMBH
By________________________________
Title:
<PAGE> 232
EXHIBIT B-3
<PAGE> 233
EXHIBIT B-3
FORM OF DELAYED DRAW TERM NOTE
$_____________ New York, New York
_______ ___, 199_
FOR VALUE RECEIVED, ALLIANCE GAMING CORPORATION, a Nevada corporation
(the "Borrower"), hereby promises to pay to the order of __________ (the
"Lender"), in lawful money of the United States of America in immediately
available funds, at the appropriate Payment Office (as defined in the Agreement
referred to below) of Credit Suisse First Boston (the "Administrative Agent") on
the Delayed Draw Term Loan Maturity Date (as defined in the Agreement) the
principal sum of ______________________ DOLLARS ($__________) or, if less, the
unpaid principal amount of the Delayed Draw Term Loans (as defined in the
Agreement) made by the Lender pursuant to the Agreement.
The Borrower promises also to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates and at the times provided in Section 1.08 of the Agreement.
This Note is one of the Delayed Draw Term Notes referred to in the
Credit Agreement, dated as of August 8, 1997, among the Borrower, Bally Wulff
Vertriebs GmbH, Bally Wulff Automaten GmbH, the lenders from time to time party
thereto (including the Lender), and the Administrative Agent (as amended,
modified or supplemented from time to time, the "Agreement") and is entitled to
the benefits thereof and of the other Credit Documents (as defined in the
Agreement). This Note is secured by certain of the Security Documents (as
defined in the Agreement) and is entitled to the benefits of certain of the
Guaranties (as defined in the Agreement). This Note is subject to voluntary
prepayment and mandatory repayment prior to the Delayed Draw Term Loan Maturity
Date, in whole or in part, as provided in the Agreement.
In case an Event of Default (as defined in the Agreement) shall occur
and be continuing, the principal of and accrued interest on this Note may be
declared to be due and payable in the manner and with the effect provided in the
Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
ALLIANCE GAMING CORPORATION
By________________________________
Title:
<PAGE> 234
EXHIBIT B-4
<PAGE> 235
EXHIBIT B-4
FORM OF TRANCHE B TERM NOTE
$_____________ New York, New York
_______ ___, 199_
FOR VALUE RECEIVED, ALLIANCE GAMING CORPORATION, a Nevada corporation
(the "Borrower"), hereby promises to pay to the order of __________ (the
"Lender"), in lawful money of the United States of America in immediately
available funds, at the appropriate Payment Office (as defined in the Agreement
referred to below) of Credit Suisse First Boston (the "Administrative Agent") on
the Tranche B Term Loan Maturity Date (as defined in the Agreement) the
principal sum of _______ DOLLARS ($______) or, if less the unpaid principal
amount of the Tranche B Term Loans (as defined in the Agreement) made by the
Lender pursuant to the Agreement.
The Borrower promises also to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates and at the times provided in Section 1.08 of the Agreement.
This Note is one of the Tranche B Term Notes referred to in the Credit
Agreement, dated as of August 8, 1997, among the Borrower, Bally Wulff Vertriebs
GmbH, Bally Wulff Automaten GmbH, the lenders from time to time party thereto
(including the Lender), and the Administrative Agent (as amended, modified or
supplemented from time to time, the "Agreement") and is entitled to the benefits
thereof and of the other Credit Documents (as defined in the Agreement). This
Note is secured by certain of the Security Documents (as defined in the
Agreement) and is entitled to the benefits of the Guaranties (as defined in the
Agreement). This Note is subject to voluntary prepayment and mandatory repayment
prior to the Tranche B Term Loan Maturity Date, in whole or in part, as provided
in the Agreement.
In case an Event of Default (as defined in the Agreement) shall occur
and be continuing, the principal of and accrued interest on this Note may be
declared to be due and payable in the manner and with the effect provided in the
Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH
AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
ALLIANCE GAMING CORPORATION
By________________________________
Title:
<PAGE> 236
EXHIBIT-5
<PAGE> 237
EXHIBIT B-5
FORM OF TRANCHE C TERM NOTE
$_____________ New York, New York
_______ ___, 199_
FOR VALUE RECEIVED, ALLIANCE GAMING CORPORATION, a Nevada corporation
(the "Borrower"), hereby promises to pay to the order of __________ (the
"Lender"), in lawful money of the United States of America in immediately
available funds, at the appropriate Payment Office (as defined in the Agreement
referred to below) of Credit Suisse First Boston (the "Administrative Agent") on
the Tranche C Term Loan Maturity Date (as defined in the Agreement) the
principal sum of _______ DOLLARS ($______) or, if less the unpaid principal
amount of the Tranche C Term Loans (as defined in the Agreement) made by the
Lender pursuant to the Agreement.
The Borrower promises also to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates and at the times provided in Section 1.08 of the Agreement.
This Note is one of the Tranche C Term Notes referred to in the Credit
Agreement, dated as of August 8, 1997, among the Borrower, Bally Wulff Vertriebs
GmbH, Bally Wulff Automaten GmbH, the lenders from time to time party thereto
(including the Lender), and the Administrative Agent (as amended, modified or
supplemented from time to time, the "Agreement") and is entitled to the benefits
thereof and of the other Credit Documents (as defined in the Agreement). This
Note is secured by certain of the Security Documents (as defined in the
Agreement) and is entitled to the benefits of the Guaranties (as defined in the
Agreement). This Note is subject to voluntary prepayment and mandatory repayment
prior to the Tranche C Term Loan Maturity Date, in whole or in part, as provided
in the Agreement.
In case an Event of Default (as defined in the Agreement) shall occur
and be continuing, the principal of and accrued interest on this Note may be
declared to be due and payable in the manner and with the effect provided in the
Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
ALLIANCE GAMING CORPORATION
By________________________________
Title:
<PAGE> 238
EXHIBIT B-6
<PAGE> 239
EXHIBIT B-6
FORM OF DOLLAR REVOLVING NOTE
$_______________ New York, New York
____________, 199_
FOR VALUE RECEIVED, ALLIANCE GAMING CORPORATION, a Nevada corporation
(the "Borrower"), hereby promises to pay to the order of ______________ (the
"Lender"), in lawful money of the United States of America in immediately
available funds, at the appropriate Payment Office (as defined in the Credit
Agreement referred to below) of Credit Suisse First Boston (the "Administrative
Agent") on the Revolving Loan Maturity Date (as defined in the Credit Agreement)
the principal sum of _______________ DOLLARS ($______________) or, if less, the
then unpaid principal amount of all Dollar Revolving Loans (as defined in the
Credit Agreement) made by the Lender pursuant to the Credit Agreement.
The Borrower promises also to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates and at the times provided in Section 1.08 of the Agreement.
This Note is one of the Dollar Revolving Notes referred to in the
Credit Agreement, dated as of August 8, 1997, among the Borrower, Bally Wulff
Vertriebs GmbH, Bally Wulff Automaten GmbH, the lenders from time to time party
thereto (including the Lender), and the Administrative Agent (as amended,
modified or supplemented from time to time, the "Credit Agreement"), and is
entitled to the benefits thereof and of the other Credit Documents (as defined
in the Credit Agreement). This Note is secured by certain of the Security
Documents (as defined in the Credit Agreement) and is entitled to the benefits
of certain of the Guaranties (as defined in the Credit Agreement). This Note is
subject to voluntary prepayment and mandatory repayment prior to the Revolving
Loan Maturity Date, in whole or in part, as provided in the Credit Agreement.
In case an Event of Default (as defined in the Credit Agreement) shall
occur and be continuing, the principal of and accrued interest on this Note may
be declared to be due and payable in the manner and with the effect provided in
the Credit Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
ALLIANCE GAMING CORPORATION
By_____________________________
Title:
<PAGE> 240
EXHIBIT B-7
<PAGE> 241
EXHIBIT B-7
FORM OF DEUTSCHE MARK REVOLVING NOTE
DM_______________ New York, New York
_____________, 199_
FOR VALUE RECEIVED, BALLY WULFF VERTRIEBS GMBH ("BWV"), and BALLY WULFF
AUTOMATEN GMBH, a company with limited liability organized under the laws of the
Federal Republic of Germany ("BWA" and, together with BWV, each a "Borrower"
and, collectively, the "Borrowers"), hereby jointly and severally promise to pay
to the order of (the "Lender"), in lawful money of the Federal Republic of
Germany in immediately available funds, at the appropriate Payment Office (as
defined in the Credit Agreement referred to below) of Credit Suisse First Boston
(the "Administrative Agent") on the Revolving Loan Maturity Date (as defined in
the Agreement) the principal sum of ____________ DEUTSCHE MARKS (DM_____) or, if
less, the unpaid principal amount of all Deutsche Mark Revolving Loans (as
defined in the Agreement) made by the Lender pursuant to the Credit Agreement.
The Borrowers also jointly and severally promise to pay interest on the
unpaid principal amount hereof in like money at said office from the date hereof
until paid at the rates and at the times provided in Section 1.08 of the
Agreement.
This Note is one of the Deutsche Mark Revolving Notes referred to in
the Credit Agreement, dated as of August 8, 1997, among Alliance Gaming
Corporation, the Borrowers, the lenders from time to time party thereto
(including the Lender), and the Administrative Agent (as amended, modified or
supplemented from time to time, the "Credit Agreement"), and is entitled to the
benefits thereof and of the other Credit Documents (as defined in the Credit
Agreement). This Note is secured by certain of the Security Documents (as
defined in the Credit Agreement) and is entitled to the benefits of the
Guaranties (as defined in the Credit Agreement). This Note is subject to
voluntary prepayment and mandatory repayment prior to the Revolving Loan
Maturity Date, in whole or in part, as provided in the Credit Agreement.
In case an Event of Default (as defined in the Credit Agreement) shall
occur and be continuing, the principal of and accrued interest on this Note may
be declared to be due and payable in the manner and with the effect provided in
the Credit Agreement.
The Borrowers hereby waive presentment, demand, protest or notice of
any kind in connection with this Note.
<PAGE> 242
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
BALLY WULFF VERTRIEBS GMBH
By_____________________________
Title:
BALLY WULFF AUTOMATEN GMBH
By_____________________________
Title:
<PAGE> 243
EXHIBIT B-8
<PAGE> 244
EXHIBIT B-8
SWINGLINE NOTE
$________ New York, New York
____________, 199_
FOR VALUE RECEIVED, ALLIANCE GAMING CORPORATION, a Nevada corporation
(the "Borrower"), hereby promises to pay to the order of CREDIT SUISSE FIRST
BOSTON (the "Bank"), in lawful money of the United States of America in
immediately available funds, at the appropriate Payment Office (as defined in
the Agreement referred to below) of Credit Suisse First Boston (the
"Administrative Agent") on the Swingline Expiry Date (as defined in the
Agreement) the principal sum of ______________ DOLLARS ($_____________) or, if
less, the unpaid principal amount of all Swingline Loans (as defined in the
Agreement) made by the Bank pursuant to the Agreement.
The Borrower promises also to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates and at the times provided in Section 1.08 of the Agreement.
This Note is the Swingline Note referred to in the Credit Agreement,
dated as of August 8, 1997, among the Borrower, Bally Wulff Vertriebs GmbH,
Bally Wulff Automaten GmbH, the lenders party thereto (including the Lender)
from time to time and CREDIT SUISSE FIRST BOSTON, as Administrative Agent (as
amended, modified or supplemented from time to time, the "Agreement") and is
entitled to the benefits thereof and of the other Credit Documents (as defined
in the Agreement). This Note is secured by certain of the Security Documents (as
defined in the Agreement) and is entitled to the benefits of certain of the
Guaranties (as defined in the Agreement). This Note is subject to voluntary
prepayment and mandatory repayment prior to the Swingline Expiry Date, in whole
or in part, as provided in the Agreement.
In case an Event of Default (as defined in the Agreement) shall occur
and be continuing, the principal of and accrued interest on this Note may become
or be declared to be due and payable in the manner and with the effect provided
in the Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
ALLIANCE GAMING CORPORATION
By__________________________
Title:
<PAGE> 245
EXHIBIT C
<PAGE> 246
EXHIBIT C
FORM OF LETTER OF CREDIT REQUEST
No. (1) Dated (2)
Credit Suisse First Boston, individually and as Administrative Agent
under the Credit Agreement (as amended, modified or supplemented from time to
time, the "Credit Agreement"), dated as of August 8, 1997, among Alliance Gaming
Corporation, Bally Wulff Vertriebs GmbH, Bally Wulff Automaten GmbH (the
"Borrowers" and each a "Borrower"), the Lenders from time to time party thereto,
and Credit Suisse First Boston, as Administrative Agent.
Eleven Madison Avenue
New York, New York 10010
Attention :
Dear Sirs:
We hereby request that [Name of Proposed Issuing Bank], in its
individual capacity, issue a [Standby] [Trade] Letter of Credit for the [joint
and several] (3) account of the undersigned on (4) (the "Date of Issuance")
in the aggregate stated amount of (5). The requested Letter of Credit shall be
denominated in (6) .
- ----------------
(1) Letter of Credit Request Number.
(2) Date of Letter of Credit Request.
(3) Insert in the case a German Letter of Credit is requested.
(4) Date of Issuance which shall be at least 5 Business Days from the date
hereof (or such shorter period as may be acceptable to the Issuing Bank).
(5) Aggregate initial stated amount of Letter of Credit.
(6) Specify Dollars in the case of U.S. Letters of Credit and Deutsche Marks
in the case of German Letters of Credit.
<PAGE> 247
EXHIBIT C
Page 2
For purposes of this Letter of Credit Request, unless otherwise defined
herein, all capitalized terms used herein which are defined in the Credit
Agreement shall have the respective meaning provided therein.
The beneficiary of the requested Letter of Credit will be (7), and such
Letter of Credit will be in support of (8) and will have a stated expiration
date of (9). The Letter of Credit will be a [U.S./German](10) Letter of Credit.
We hereby certify that:
(1) The representations and warranties contained in the Credit
Documents will be true and correct in all material respects on the Date
of Issuance, both before and after giving effect to the issuance of the
Letter of Credit requested hereby (it being understood and agreed that
any representation or warranty which by its terms is made as of a
specified date shall be required to be true and correct in all material
respects only as of such specified date).
- --------
(7) Insert name and address of beneficiary.
(8) Insert description of L/C Supportable Obligations in the case of Standby
Letters of Credit and a description of the commercial transaction which is
being supported in the case of Trade Letters of Credit.
(9) Insert last date upon which drafts may be presented which (i) in the case
of Standby Letters of Credit, may not be later than the 12 months after
the Date of Issuance or, if earlier, the third Business Day prior to the
Revolving Loan Maturity Date (although any such Standby Letter of Credit
may be extendable for successive periods of up to 12 months, but not
beyond the third Business Day prior to the Revolving Loan Maturity Date on
terms acceptable to Issuing Bank) or (ii) in the case of Trade Letters of
Credit, may not be later than 180 days after the Date of Issuance or, if
earlier, the date which is 30 days prior to the Revolving Loan Maturity
Date.
(10) Insert appropriate alternative.
<PAGE> 248
EXHIBIT C
Page 3
(2) No Default or Event of Default has occurred and is
continuing nor, after giving effect to the issuance of the Letter of
Credit requested hereby, would such a Default or an Event of Default
occur.
[ALLIANCE GAMING CORPORATION
By_____________________________
Title:]
[BALLY WULFF VERTRIEBS GMBH
By_____________________________
Title:
BALLY WULFF AUTOMATEN GMBH
By_____________________________
Title:
<PAGE> 249
EXHIBIT D
<PAGE> 250
EXHIBIT D
SECTION 4.04(b)(ii) CERTIFICATE
Reference is hereby made to the Credit Agreement, dated as of August 8,
1997, among Alliance Gaming Corporation, Bally Wulff Vertriebs GmbH, Bally Wulff
Automaten GmbH, the Lenders from time to time party thereto, and Credit Suisse
First Boston, as Administrative Agent (as amended from time to time, the "Credit
Agreement"). Pursuant to the provisions of Section 4.04(b)(ii) of the Credit
Agreement, the undersigned hereby certifies that it is not a "bank" as such term
is used in Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as
amended.
[NAME OF BANK]
By ____________________________
Title:
Date: _______________, ____
<PAGE> 251
EXHIBIT F
<PAGE> 252
EXHIBIT F
[NAME OF CREDIT PARTY]
FORM OF OFFICERS' CERTIFICATE
I, the undersigned, [Title of Authorized Officer] of [NAME OF CREDIT
PARTY], a [corporation] [partnership] organized and existing under the laws of
[the State of ________] [Country of incorporation] (the "Company"), DO HEREBY
CERTIFY that:
1. This Certificate is furnished pursuant to the Credit Agreement,
dated as of August 8, 1997, among Alliance Gaming Corporation, Bally Wulff
Vertriebs GmbH, Bally Wulff Automaten GmbH, the Lenders from time to time party
thereto, and Credit Suisse First Boston, as Administrative Agent (such Credit
Agreement, as in effect on the date of this Certificate, being herein called the
"Credit Agreement"). Unless otherwise defined herein, capitalized terms used in
this Certificate shall have the meanings set forth in the Credit Agreement.
2. The following named individuals are presently the elected officers
of the Company, each holds the office of the Company set forth opposite his or
her name below and has held such office as of the date of signing of any Credit
Document. The signature written opposite the name and title of each such officer
below is his or her correct signature.
<TABLE>
<CAPTION>
Name(1) Office Signature
<S> <C> <C>
__________________ ____________________ _________________
__________________ ____________________ _________________
__________________ ____________________ _________________
</TABLE>
3. Attached hereto as Exhibit A is a true and correct copy of the
[Certificate of Incorporation of the Company as filed in the Office of the
Secretary of State of the State of its incorporation][equivalent organizational
documents], together with all amendments thereto adopted through the date
hereof.
- --------
(1) Include name, office and signature of each officer who will sign any
Credit Document, including the officer who will sign the certification at
the end of this Certificate.
<PAGE> 253
EXHIBIT F
Page 2
4. Attached hereto as Exhibit B is a true and correct copy of the
By-Laws (or equivalent organizational document) of the Company, together with
all amendments thereto, which were duly adopted and are in full force and effect
on the date hereof.
5. Attached hereto as Exhibit C is a true and correct copy of
resolutions which were duly adopted on __________, 199_ [by unanimous written
consent of the Board of Directors of the Company] [by a meeting of the Board of
Directors of the Company at which a quorum was present and acting throughout],
and said resolutions have not been rescinded, amended or modified. Except as
attached hereto as Exhibit C, no resolutions have been adopted by the Board of
Directors of the Company which deal with the execution, delivery or performance
of any of the Credit Documents to which the Company is party.
[6. Attached hereto as Exhibit D are true and correct copies of all New
Senior Subordinated Notes Documents (other than the New Senior Subordinated
Notes actually issued).
7. Attached hereto as Exhibit E are true and correct copies of the
Existing PIK Preferred Stock Redemption Documents.
8. Attached hereto as Exhibit F are true and correct copies of all
Existing Senior Secured Notes Tender Offer/Consent Solicitation Documents (other
than the Existing Senior Subordinated Notes actually issued).
9. Attached hereto as Exhibit G are true and correct copies of the
Existing Senior Secured Notes Indenture, the Existing Senior Secured Notes
Indenture Supplement, the Existing Senior Secured Notes Collateral Documents and
the Existing Senior Secured Notes Collateral Document Amendments.](2)
[6][10]. On the date hereof, all of the applicable conditions set forth
in Sections 5A.05, 5A.06, 5A.07, 5A.08, 5A.09. 5A.10, 5A.11 and 5A.19 of the
Credit Agreement have been satisfied.](3)
[6][7][11]. On the date hereof, the representations and warranties
contained in the Credit Agreement and in the other Credit Documents are true and
correct in all material respects, both before and after giving effect to each
Credit Event to occur on the date hereof and the application of the proceeds
thereof (it being understood and agreed that
- --------
(2) Insert only in Officer's Certificate of the U.S. Borrower.
(3) Insert only in Officers' Certificate of a Borrower.
<PAGE> 254
EXHIBIT F
Page 3
any representation or warranty which by its terms is made as of a specified date
shall be required to be true and correct in all material respects only as of
such specified date).
[7][8][12]. On the date hereof, no Default or Event of Default has
occurred and is continuing or would result from the Credit Events to occur on
the date hereof or from the application of the proceeds thereof.
[8][9][13]. There is no proceeding for the dissolution or liquidation
of the Company or, to the knowledge of the Company, threatening its existence.
IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of
__________, 1997.
[NAME OF CREDIT PARTY]
______________________________
Name:
Title:
<PAGE> 255
EXHIBIT F
Page 4
I, the undersigned, [Secretary] [Assistant Secretary] of the Company,
do hereby certify that:
1. [Name of Person making above certifications] is the duly
elected and qualified [Title] of the Company and the signature above is
[his/her] genuine signature.
2. The certifications made by [name of Person making the above
certifications] on behalf of the Company in paragraphs 2, 3, 4, 5 and
[8][9][13] above are true and correct.
IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of
__________, 1997.
[NAME OF CREDIT PARTY]
___________________________________
Name:
Title:
<PAGE> 256
EXHIBIT G
<PAGE> 257
EXHIBIT G
[CONFORMED AS EXECUTED]
BAILEE AGREEMENT
THIS BAILEE AGREEMENT (this "Bailee Agreement") is made as of the 8th
day of August, 1997 among CREDIT SUISSE FIRST BOSTON, as Administrative Agent
and as Collateral Agent under the Credit Agreement and the other Credit
Documents and for the benefit of the Lenders from time to time party to the
Credit Agreement and the other Secured Creditors from time to time, United
States Trust Company of New York (the "Bailee"), ALLIANCE GAMING CORPORATION, a
Nevada corporation (the "U.S. Borrower") and each Subsidiary of the U.S.
Borrower which is a party to any Indenture Collateral Document.
W I T N E S S E T H :
WHEREAS, the U.S. Borrower has issued $154,000,000 of the Senior
Secured Notes pursuant to the Indenture, of which $153,981,000 aggregate
principal amount of Senior Secured Notes has been accepted by the U.S. Borrower
for purchase pursuant to its Offer to Purchase dated July 3, 1997;
WHEREAS, the obligations of the U.S. Borrower with respect to the
Senior Secured Notes which remain outstanding are guaranteed by the Subsidiaries
of the U.S. Borrower party to this Agreement, and are secured pursuant to the
Indenture Collateral Documents;
WHEREAS, the Lenders have entered or are about to enter into the Credit
Agreement with the Borrowers pursuant to which CSFB and various other Lenders
will, upon certain terms and conditions, make loans and provide other financial
accommodations to the Borrowers secured by substantially all of the assets and
properties of the U.S. Borrower and its Subsidiaries (a portion of the proceeds
of which will be used to pay for the purchase of Senior Secured Notes tendered
pursuant to the Offer to Purchase described above in the first recital);
<PAGE> 258
EXHIBIT G
Page 2
WHEREAS, it is a condition precedent to the extensions of credit
pursuant to the Credit Agreement that this Agreement shall have been entered
into by the parties hereto;
WHEREAS, the parties hereto desire to enter into this Agreement to
satisfy the condition precedent referenced in the immediately preceding
paragraph and to set forth their respective rights, obligations and
responsibilities in connection with various collateral held by the Bailee
pursuant to the Indenture Collateral Documents;
NOW, THEREFORE, in consideration of the mutual benefits accruing
hereunder and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto do hereby agree as follows:
1. DEFINITIONS
As used above and in this Bailee Agreement, the following terms shall
have the meanings ascribed to them below:
"Administrative Agent" shall mean the Administrative Agent, under, and
as defined in, the Credit Agreement (including its successors in such capacity).
"Agreements" shall mean, collectively, the CSFB Agreements, the Senior
Secured Notes, the Indenture and the Indenture Collateral Documents.
"Bailee" shall have the meaning provided in the first paragraph of this
Bailee Agreement.
"Bailee Agreement" shall have the meaning provided in the first
paragraph hereof.
"Borrowers" shall mean any entity at any time which is a Borrower
under, and as defined in, the Credit Agreement, as then in effect.
"Collateral Agent" shall mean the Collateral Agent under, and as
defined in, the Credit Agreement and the various other Credit Documents,
including any successor thereto.
"Credit Agreement" shall mean the Credit Agreement, dated of even date
herewith, among the U.S. Borrower, Bally Wulff Vertriebs GmbH, Bally Wulff
<PAGE> 259
EXHIBIT G
Page 3
Automaten GmbH, various Lenders party thereto from time to time, and CSFB as
Administrative Agent, as such agreement may be amended (including any amendment,
restatement or restructuring thereof), supplemented or otherwise modified or
replaced from time to time, including any agreement extending the maturity of,
refunding, refinancing, increasing the amount available under or replacing such
agreement or document or any successor or replacement agreement or document and
whether by the same or any other agent, lender or group of lenders.
"Credit Documents" shall mean that term as defined in the Credit
Agreement.
"Creditors" shall mean, collectively, CSFB (including in its capacity
as Administrative Agent and Collateral Agent for the various Secured Creditors
from time to time) and the Trustee (including in its capacity as the Trustee for
the holders of the Senior Secured Notes) and their respective successors and
assigns.
"CSFB" shall mean Credit Suisse First Boston and its successors and
assigns, acting in its capacity as Administrative Agent and Collateral Agent
under the Credit Agreement and for the benefit of the Lenders and the other
Secured Creditors.
"CSFB Agreements" shall mean, collectively, (a) the Credit Agreement,
(b) each Interest Rate Agreement or Other Hedging Agreement (each as defined in
the Credit Agreement) at any time secured pursuant to the Credit Agreement or
the related Credit Documents and (c) each guaranty, security agreement, pledge
agreement, mortgage or other Security Document (as defined in the Credit
Agreement) or Credit Document from time to time entered into pursuant to, or in
connection with, the Credit Agreement or the Interest Rate Agreements or Other
Hedging Agreements referenced in preceding clause (b).
"Existing Indenture Collateral" shall mean all Indenture Collateral as
same exists on the date of this Bailee Agreement (after giving effect to the
execution and delivery of the First Supplemental Indenture), as well as all
other Indenture Collateral required to be delivered pursuant to the Existing
Indenture Collateral Documents in accordance with the terms thereof as in effect
on the date of this Bailee Agreement (after giving effect to the execution and
delivery of the First Supplemental Indenture), and any proceeds thereof
constituting collateral pursuant to said Existing Indenture Collateral Documents
as in effect on the date of this Bailee Agreement.
"Existing Indenture Collateral Documents" shall mean all Indenture
Collateral Documents in effect on the date hereof (after giving effect to the
execution
<PAGE> 260
EXHIBIT G
Page 4
and delivery of the First Supplemental Indenture), which agreements consist of
(i) a Pledge Agreement, dated as of June 18, 1996, among Alliance Gaming
Corporation, various of its Subsidiaries and the Trustee and (ii) the Pledge and
Security Agreement dated as of June 18, 1996, among Alliance Gaming Corporation,
various of its Subsidiaries and the Trustee, in each case after giving effect to
all amendments or modifications thereto effected on or prior to the date hereof
(including pursuant to the First Supplemental Indenture).
"First Supplemental Indenture" shall mean the First Supplemental
Indenture, dated as of August 8, 1997, supplementing the Indenture and the
Existing Indenture Collateral Documents.
"Indenture" shall mean the Indenture, dated as of June 18, 1996, among
U.S. Borrower the Guarantors referred to therein and the Trustee, as the same
now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
"Indenture Documents" shall mean, collectively, the Senior Secured
Notes, the Indenture and the Indenture Collateral Documents.
"Indenture Collateral" shall mean all stock, promissory notes, cash,
investments, proceeds thereof and any other collateral whatsoever at any time
delivered to the Trustee (or any agent or sub-agent upon its behalf) pursuant to
the Indenture or any of the Indenture Collateral Documents.
"Indenture Collateral Documents" shall mean all pledge or security
agreements, and any other agreement securing, the Senior Secured Notes or any
obligations owing pursuant to the Indenture, whether now in existence or at any
time entered into, including, without limitation all Collateral Agreements as
defined in the Indenture as in effect on the date hereof.
"Lenders" shall mean each lender from time to time party to the Credit
Agreement.
"Obligations" shall mean all obligations, liabilities and indebtedness
of every kind, nature and description owing by the U.S. Borrower or any of its
Subsidiaries (including each Borrower) to the Creditors, the Secured Creditors
or the holders of Senior Secured Notes (and as to CSFB, the Lenders and
participants under the Credit Agreement and the other Secured Creditors),
including principal, reimbursement obligations, interest, charges, fees,
premiums, indemnities and expenses, however evidenced,
<PAGE> 261
EXHIBIT G
Page 5
whether as principal, surety, endorser, guarantor or otherwise, whether arising
under the CSFB Agreements, the Indenture Documents or by operation of law,
whether now existing or hereafter arising, whether arising before, during or
after the initial or any renewal term of the CSFB Agreements or Indenture
Documents or after the commencement of any case with respect to the U.S.
Borrower or any of its Subsidiaries under the U.S. Bankruptcy Code or any
similar statute, whether direct or indirect, absolute or contingent, joint or
several, due or not due, primary or secondary, liquidated or unliquidated,
secured or unsecured, original, renewed or extended, and shall also include all
amounts chargeable to the U.S. Borrower or any of its Subsidiaries under the
CSFB Agreements or Indenture Documents, as the case may be, or in connection
with any of the foregoing.
"Secured Creditors" shall mean each Lender and each other person or
entity which constitutes a creditor secured pursuant to any of the Credit
Documents or defined as a "Secured Creditor" pursuant to the Credit Agreement.
"Senior Secured Notes" shall mean, individually and collectively, the
12-7/8% Senior Secured Notes due 2003 issued by U.S. Borrower pursuant to the
Indenture, as the same now exist or may hereafter be amended, modified or
supplemented from time to time.
"Subsidiary" shall have the meaning provided in the Indenture, as in
effect on the date of this Bailee Agreement.
"Trustee" shall mean United States Trust Company of New York, acting in
its capacity as Trustee on behalf of the holders of the Senior Secured Notes
pursuant to the Indenture, and its successors and assigns (and including,
without limitation, any successor, assignee or additional person at any time
acting as Trustee for the benefit of the holders of the Senior Secured Notes).
"U.S. Borrower" shall mean Alliance Gaming Corporation, a Nevada
corporation, and its successors and assigns, including, without limitation, a
receiver, trustee or debtor-in-possession on behalf of the U.S. Borrower or on
behalf of any such successor or assign.
All terms used herein which are defined in the Uniform Commercial Code,
unless otherwise defined herein, shall have the meanings set forth therein. All
references to any term in the plural shall include the singular and all
references to any term in the singular shall include the plural.
<PAGE> 262
EXHIBIT G
Page 6
2. NOTICE OF SECURITY INTERESTS; ETC.
2.1 Notice. Notice is hereby given to the Bailee that security
interests in all Indenture Collateral (including without limitation all Existing
Indenture Collateral in the possession of the Bailee) have been granted pursuant
to the Credit Documents to secure all Obligations owing to the Secured
Creditors. Such security interests have been created in favor of the Collateral
Agent for the benefit of the Secured Creditors, and apply to all Indenture
Collateral now or hereafter in the Bailee's possession, including, without
limitation, all certificated securities, letters of credit, advices of credit,
goods and instruments now or at any time hereafter in the Bailee's possession.
The notice given pursuant to this paragraph is intended by the parties hereto to
perfect the Collateral Agent's (on behalf of the Secured Creditors) security
interests in all Indenture Collateral now or at any time hereafter in your
possession. Such notice is given for purposes of all applicable law (including
without limitation the provisions of Sections 9-305 and 8-313 of the Uniform
Commercial Code as in effect in the States of New York and Nevada).
2.2 Bailee Representations. For the benefit of the Secured Creditors,
the Bailee hereby represents that (x) Annex I hereto constitutes a true and
correct list, as of the date hereof, of all Existing Indenture Collateral in its
possession and (y) Annex II hereto is a true and correct list of each (or any)
agent, sub-agent, sub-collateral agent, custodian, bailee or other Person, as
of the date hereof, holding any Existing Indenture Collateral for, or at the
direction of, the Bailee, together with a true and correct list as of the date
hereof of all Existing Indenture Collateral held by such agent, sub-agent,
sub-collateral agent, custodian, bailee or other Person.
2.3 Successor Bailee; Resignation of Bailee. (a) If the Bailee at any
time resigns as a holder of Indenture Collateral, it shall (contemporaneously
with the effectiveness of such resignation) use reasonable efforts to cause any
successor to it as holder of Indenture Collateral (if any) to execute a Bailee
Agreement in substantially the form of this Bailee Agreement.
3. DELIVERY OF INDENTURE COLLATERAL TO CSFB.
3.1 Delivery of Collateral. (a) If at any time any Indenture Collateral
held by the Bailee or any of its agents or sub-agent is, in accordance with the
requirements of the respective Indenture Collateral Document, to be delivered to
the U.S. Borrower or any of its Subsidiaries (including without limitation as a
result of any covenant defeasance effected in accordance with the requirements
of the Indenture), the Bailee shall instead directly deliver such Indenture
Collateral to CSFB to be held by it
<PAGE> 263
EXHIBIT G
Page 7
pursuant to the Credit Documents (or released by it in accordance with the terms
thereof if same is not required to be held pursuant thereto).
(b) If at any time an Event of Default under, and as defined in, the
Indenture occurs and the Bailee (or the Trustee) takes remedial action, or
otherwise obtains proceeds from, the Indenture Collateral, any Indenture
Collateral (or proceeds thereof) which remains after the satisfaction in full of
all Obligations of, and claims of, the holders of the Senior Secured Notes (and
of the Trustee and any Bailee) will be delivered to CSFB.
(c) By their execution and delivery of a copy of this Agreement, each
of the U.S. Borrower and each of its Subsidiaries party hereto hereby authorizes
and directs the Bailee to deliver Indenture Collateral to CSFB in accordance
with the provisions of preceding clauses (a) and (b).
4. MISCELLANEOUS
4.1 Successors and Assigns. (a) This Agreement shall be binding upon
the parties hereto and their respective successors and assigns and shall inure
to the benefit of each of Creditors (and the Secured Creditors) and their
respective successors, participants and assigns.
(b) In connection with any assignment or transfer of any or all of the
obligations owed to either Creditor or any or all rights of either of the
Creditors in the Indenture Collateral (other than pursuant to a participation),
the Bailee, the U.S Borrower and each of the Creditors agrees to execute and
deliver an agreement containing terms substantially identical to those contained
herein in favor of any such assignee or transferee and, in addition, upon CSFB's
request, will execute and deliver an agreement containing terms substantially
identical to those contained herein in favor of any third person who succeeds to
or replaces a material portion of the financing pursuant to the CSFB Agreements,
whether such successor financing or replacement occurs by transfer, assignment,
"takeout" or any other means or vehicle.
4.2 Notices. All notices, requests and demands to or upon the respec-
tive parties hereto shall be in writing and shall be deemed duly given, made or
received: if delivered in person, immediately upon delivery; if by telex,
telegram or facsimile transmission, immediately upon sending and upon
confirmation of receipt; if by nationally recognized overnight courier service
with instructions to deliver the next business day, one (1) business day after
sending; and if mailed by certified mail, return receipt requested, five (5)
days after mailing to the parties at their addresses set forth
<PAGE> 264
EXHIBIT G
Page 8
below (or to such other addresses as the parties may designate in accordance
with the provisions of this Section):
To CSFB:
Credit Suisse First Boston
Eleven Madison Avenue
New York, New York 10010
Attention: Ed Barr
Telephone No.: (212) 325-9151
Telecopier No.: (212) 325-8309
To the Bailee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-153
Attention: Corporate Trust and Agency Division
Telephone No.: (212) 852-1000
Telecopier No.: (212) 852-1626
To the U.S. Borrower:
Alliance Gaming Corporation
6601 South Bermuda Road
Las Vegas, Nevada 89119
Telephone No.: (702) 896-7700
Telecopier No.: (702) 263-5636
Attention: Scott Schweinfurth
Any Creditor may change the address(es) to which all notices, requests and other
communications are to be sent by giving written notice of such address change to
the other Creditor in conformity with this Section 6.2, but such change shall
not be effective until notice of such change has been received by the other
Creditor.
<PAGE> 265
EXHIBIT G
Page 9
4.3 Counterparts. This Bailee Agreement may be executed in any number
of counterparts, each of which shall be an original with the same force and
effect as if the signatures thereto and hereto were upon the same instrument.
4.4 Governing Law. The validity, construction and effect to this
Agreement shall be governed by the laws of the State of New York (without regard
to principles of conflict of laws).
4.5 Compensation. The Bailee shall not be entitled to any independent
compensation for its actions as Bailee hereunder; provided that the U.S.
Borrower agrees to promptly reimburse the Bailee for any fees and expenses
incurred by it hereunder (including, without limitation, reasonable fees and
expenses of legal counsel). Furthermore, the U.S. Borrower shall indemnify the
Bailee, to the same extent as it is obligated to indemnify the Trustee pursuant
to Section 8.7 of the Indenture, for any actions taken by it as Bailee pursuant
to this Bailee Agreement, which indemnification obligations shall be fully
secured by the Indenture Collateral.
4.6 No Third Parties Benefitted. Except as expressly provided in
Section 6.1, this Agreement is solely for the benefit of Bailee, the Creditors
(and the Secured Creditors) and the U.S. Borrower, its Subsidiaries party hereto
and their respective successors, participants and assigns, and no other person
shall have any right, benefit, priority or interest under, or because of the
existence of, this Bailee Agreement.
4.7 Applicable Gaming Laws. The parties hereto agree that the
provisions of this Agreement are subject to all Applicable Gaming Regulations
(as defined in the Credit Agreement) and all Gaming Regulations (as defined in
the Indenture). Furthermore, to the extent that at any time any Indenture
Collateral is not pledged to secure the Obligations owing pursuant to the Credit
Agreement (in the circumstances contemplated by Section 13.18 of the Credit
Agreement or otherwise), then this Bailee Agreement shall not create or be
deemed to create a security interest in such Indenture Collateral.
4.8 Term. This Bailee Agreement is a continuing agreement and shall
remain in full force and effect until the satisfaction in full of all
Obligations owing to the holders of the Senior Secured Notes and the Trustee, if
any, and the transfer by the Bailee of all Indenture Collateral then held by it
to CSFB in accordance with the requirements of this Bailee Agreement.
<PAGE> 266
IN WITNESS WHEREOF, the parties have caused this Bailee Agreement to be
duly executed as of the day and year first above written.
UNITED STATES TRUST COMPANY
OF NEW YORK
By:/s/ John Guiliano
-------------------------------
Title: Vice President
CREDIT SUISSE FIRST BOSTON,
as Administrative Agent and
as Collateral Agent
By:/s/ Sean S. Bernard
-------------------------------
Title: Assistant Vice President
By:/s/ Edward Barr
-------------------------------
Title: Associate
<PAGE> 267
Each of the undersigned hereby acknowledges and agrees to the foregoing
terms and provisions. By its signature below, each of the undersigned agrees
that it will, together with its successors and assigns, be bound by the
provisions of the foregoing Bailee Agreement.
Each of the undersigned acknowledges and agrees that it will execute and
deliver such additional documents and take such additional action as may be
reasonably requested by either of Creditors to effectuate the provisions and
purposes of the foregoing Bailee Agreement.
ALLIANCE GAMING CORPORATION
By: /s/ Scott Schweinfurth
--------------------------
Title: Senior Vice President, CFO
and Treasurer
ALLIANCE HOLDING COMPANY,
By: /s/ Scott Schweinfurth
--------------------------
Title: Treasurer
APT GAMES, INC.,
By: /s/ Scott Schweinfurth
--------------------------
Title: Treasurer
<PAGE> 268
UNITED COIN MACHINE CO.
By: /s/ Scott Schweinfurth
--------------------------
Title: Treasurer
PLANTATION INVESTMENTS, INC.
By: /s/ Scott Schweinfurth
--------------------------
Title: Treasurer
FOREIGN GAMING VENTURES, INC.
By: /s/ Scott Schweinfurth
--------------------------
Title: Treasurer
LOUISIANA VENTURES, INC.
By: /s/ Scott Schweinfurth
--------------------------
Title: Treasurer
<PAGE> 269
UNITED GAMING RAINBOW
By: /s/ Scott Schweinfurth
--------------------------
Title: Treasurer
NATIVE AMERICAN INVESTMENT, INC.
By: /s/ Scott Schweinfurth
--------------------------
Title: Treasurer
BALLY GAMING INTERNATIONAL, INC.
By: /s/ Scott Schweinfurth
--------------------------
Title: Treasurer
BALLY GAMING, INC.
By: /s/ Scott Schweinfurth
--------------------------
Title: Treasurer
<PAGE> 270
EXHIBIT H-1
<PAGE> 271
EXHIBIT H-1
[CONFORMED AS EXECUTED]
U.S. SUBSIDIARIES GUARANTY
GUARANTY, dated as of August 8, 1997 (as amended, modified or
supplemented from time to time, this "Guaranty"), made by each of the
undersigned (each a "Guarantor", and together with any other entity that becomes
a party hereto pursuant to Section 25 hereof, the "Guarantors"). Except as
otherwise defined herein, capitalized terms used herein and defined in the
Credit Agreement (as defined below) shall be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, Alliance Gaming Corporation, Bally Wulff Vertriebs GmbH,
Bally Wulff Automaten GmbH (each a "Borrower, and collectively, the
"Borrowers"), various lenders from time to time party thereto (the "Lenders"),
and Credit Suisse First Boston, as Administrative Agent (together with any
successor agent, the "Administrative Agent", and together with the Lenders and
the Collateral Agent are herein called the "Lender Creditors"), have entered
into a Credit Agreement, dated as of August 8, 1997 (as amended, modified or
supplemented from time to time, the "Credit Agreement"), providing for the
making of Loans and the issuance of, and participation in, Letters of Credit, as
contemplated therein;
WHEREAS, each Borrower and/or one or more of its Subsidiaries may at
any time and from time to time enter into one or more Interest Rate Protection
Agreements or Other Hedging Agreements with one or more Lenders or any affiliate
thereof (each such Lender or affiliate, even if the respective Lender
subsequently ceases to be a Lender under the Credit Agreement for any reason,
together with such Lender's or affiliate's successors and assigns, if any,
collectively, the "Other Creditors," and together with the Lender Creditors, are
herein called the "Creditors");
WHEREAS, each Guarantor is a direct or indirect Subsidiary of the
U.S. Borrower;
<PAGE> 272
EXHIBIT H-1
Page 2
WHEREAS, it is a condition precedent to the making of Loans and the
issuance of Letters of Credit under the Credit Agreement that each Guarantor
shall have executed and delivered this Guaranty; and
WHEREAS, each Guarantor will obtain benefits from the incurrence of
Loans and the issuance of Letters of Credit under the Credit Agreement and the
entering into of Interest Rate Protection Agreements or Other Hedging Agreements
and, accordingly, desires to execute this Guaranty in order to satisfy the
conditions described in the preceding paragraph;
NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to each Guarantor, the receipt and sufficiency of which are hereby
acknowledged, each Guarantor hereby makes the following representations and
warranties to the Creditors and hereby covenants and agrees with each Creditor
as follows:
1. Each Guarantor, jointly and severally, unconditionally and
irrevocably guarantees: (i) to the Lender Creditors the full and prompt payment
when due (whether at the stated maturity, by acceleration or otherwise) of (x)
the principal of and interest on the Notes issued by, and the Loans made to,
each Borrower under the Credit Agreement, and all reimbursement obligations and
Unpaid Drawings with respect to Letters of Credit issued under the Credit
Agreement and (y) all other obligations (including obligations which, but for
the automatic stay under Section 362(a) of the Bankruptcy Code, would become
due) and liabilities owing by any Borrower to the Lender Creditors under the
Credit Agreement or any other Credit Document to which such Borrower is a party
(including, without limitation, indemnities, Fees and interest thereon), whether
now existing or hereafter incurred under, arising out of or in connection with
the Credit Agreement or any such other Credit Document and the due performance
and compliance with all of the terms, conditions and agreements contained in
such Credit Documents by any Borrower (all such principal, interest, liabilities
and obligations being herein collectively called the "Credit Document
Obligations"); and (ii) to each Other Creditor the full and prompt payment when
due (whether at the stated maturity, by acceleration or otherwise) of all
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities owing
by the U.S. Borrower or any Subsidiary of the U.S. Borrower (each such
Subsidiary, together with the U.S. Borrower, are herein called the "Credit
Parties") under any Interest Rate Protection Agreement or Other Hedging
Agreement, whether now in existence or hereafter arising, and the due
performance and compliance by each Credit Party with all of the terms,
conditions and agreements contained in the Interest Rate Protection Agreements
or Other Hedging Agreements (all such obligations and liabilities being herein
collectively called the "Other Obligations," and together with the Credit
Document Obligations are herein collectively called the
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"Guaranteed Obligations"). Each Guarantor understands, agrees and confirms that
the Creditors may enforce this Guaranty up to the full amount of the Guaranteed
Obligations against each Guarantor without proceeding against any other
Guarantor, any other Credit Party, against any security for the Guaranteed
Obligations, or under any other guaranty covering all or a portion of the
Guaranteed Obligations. For purposes of this Section 1, the term "Guarantor" as
applied to any Guarantor shall refer to such Guarantor as a guarantor of
indebtedness incurred by others, as opposed to indebtedness directly incurred by
it.
2. Additionally, each Guarantor, jointly and severally,
unconditionally and irrevocably, guarantees the payment of any and all
Guaranteed Obligations of any Credit Party to the Creditors whether or not due
or payable by the Credit Parties upon the occurrence in respect of such Credit
Party of any of the events specified in Section 10.05 of the Credit Agreement,
and unconditionally and irrevocably, jointly and severally, promises to pay such
Guaranteed Obligations to the Creditors, or order, on demand.
3. Each Guarantor agrees that all payments made by it with respect
to any Guaranteed Obligations pursuant to this Guaranty shall be made in the
respective currency in which the underlying Guaranteed Obligations are
denominated or payable, as the case may be. This Guaranty shall constitute a
guaranty of payment, and not of collection.
4. The liability of each Guarantor hereunder is exclusive and
independent of any security for or other guaranty of the indebtedness of any
Credit Party whether executed by such Guarantor, any other Guarantor, any other
guarantor or by any other party, and the liability of each Guarantor hereunder
shall not be affected or impaired by any circumstance or occurrence whatsoever,
including, without limitation: (a) any direction as to application of payment by
any Credit Party or by any other party, (b) any other continuing or other
guaranty, undertaking or maximum liability of a guarantor or of any other party
as to the indebtedness of any Credit Party, (c) any payment on or in reduction
of any such other guaranty or undertaking, (d) any dissolution, termination or
increase, decrease or change in personnel by any Credit Party, (e) any payment
made to any Creditor on the indebtedness which any Creditor repays to any Credit
Party pursuant to court order in any bankruptcy, reorganization, arrangement,
moratorium or other debtor relief proceeding, and each Guarantor waives any
right to the deferral or modification of its obligations hereunder by reason of
any such proceeding, (f) any action or inaction by the Creditors as contemplated
in Section 7 hereof, or (g) any invalidity, irregularity or unenforceability of
all or part of the Guaranteed Obligations or of any security therefor.
5. The obligations of each Guarantor hereunder are independent of
the obligations of any other Guarantor, any other guarantor or any Credit Party,
and a separate action or actions may be brought and prosecuted against each
Guarantor whether or not
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action is brought against any other Guarantor, any other guarantor of any Credit
Party or any Credit Party and whether or not any other Guarantor, any other
guarantor of any Credit Party or any Credit Party be joined in any such action
or actions. Each Guarantor waives, to the fullest extent permitted by law, the
benefit of any statute of limitations affecting its liability hereunder or the
enforcement thereof. Any payment by any Credit Party or other circumstance which
operates to toll any statute of limitations as to such Credit Party shall
operate to toll the statute of limitations as to each Guarantor.
6. Each Guarantor hereby waives notice of acceptance of this
Guaranty and notice of any liability to which it may apply, and waives
promptness, diligence, presentment, demand of payment, protest, notice of
dishonor or nonpayment of any such liabilities, suit or taking of other action
by the Administrative Agent or any other Creditor against, and any other notice
to, any party liable thereon (including such Guarantor, any other guarantor of
any Credit Party or any Credit Party).
7. Any Creditor may at any time and from time to time without the
consent of, or notice to, any Guarantor, without incurring responsibility to
such Guarantor, without impairing or releasing the obligations of such Guarantor
hereunder, upon or without any terms or conditions and in whole or in part:
(a) change the manner, place or terms of payment of, and/or change
or extend the time of payment of, renew or alter, any of the Guaranteed
Obligations, any security therefor, or any liability incurred directly or
indirectly in respect thereof, and the guaranty herein made shall apply to
the Guaranteed Obligations as so changed, extended, renewed or altered;
(b) sell, exchange, release, surrender, realize upon or otherwise
deal with in any manner and in any order any property by whomsoever at any
time pledged or mortgaged to secure, or howsoever securing, the Guaranteed
Obligations or any liabilities (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and/or any offset
thereagainst;
(c) exercise or refrain from exercising any rights against any
Credit Party or others or otherwise act or refrain from acting;
(d) release or substitute any one or more endorsers, guarantors, any
Credit Party or other obligors;
(e) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all
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or any part thereof to the payment of any liability (whether due or not)
of any Credit Party to creditors of such Credit Party other than the
Creditors;
(f) apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of any Credit Party to the Creditors regardless
of what liabilities of such Credit Party remain unpaid;
(g) consent to or waive any breach of, or any act, omission or
default under, any of the Interest Rate Protection Agreements or Other
Hedging Agreements, the Credit Documents or any of the instruments or
agreements referred to therein, or otherwise amend, modify or supplement
any of the Interest Rate Protection Agreements or Other Hedging
Agreements, the Credit Documents or any of such other instruments or
agreements; and/or
(h) act or fail to act in any manner referred to in this Guaranty
which may deprive such Guarantor of its right to subrogation against any
Credit Party to recover full indemnity for any payments made pursuant to
this Guaranty.
8. No invalidity, irregularity or unenforceability of all or any
part of the Guaranteed Obligations or of any security therefor shall affect,
impair or be a defense to this Guaranty, and this Guaranty shall be primary,
absolute and unconditional notwithstanding the occurrence of any event or the
existence of any other circumstances which might constitute a legal or equitable
discharge of a surety or guarantor except payment in full of the Guaranteed
Obligations.
9. This Guaranty is a continuing one and all liabilities to which it
applies or may apply under the terms hereof shall be conclusively presumed to
have been created in reliance hereon. No failure or delay on the part of any
Creditor in exercising any right, power or privilege hereunder shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
expressly specified are cumulative and not exclusive of any rights or remedies
which any Creditor would otherwise have. No notice to or demand on any Guarantor
in any case shall entitle such Guarantor to any other further notice or demand
in similar or other circumstances or constitute a waiver of the rights of any
Creditor to any other or further action in any circumstances without notice or
demand. It is not necessary for any Creditor to inquire into the capacity or
powers of any Credit Party or the officers, directors, partners or agents acting
or purporting to act on its behalf, and any indebtedness made or created in
reliance upon the professed exercise of such powers shall be guaranteed
hereunder.
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10. Any indebtedness of any Credit Party now or hereafter held by
any Guarantor is hereby subordinated to the indebtedness of such Credit Party to
the Creditors; and such indebtedness of such Credit Party to any Guarantor, if
the Administrative Agent, after an Event of Default has occurred and is
continuing, so requests, shall be collected, enforced and received by such
Guarantor as trustee for the Creditors and be paid over to the Creditors on
account of the indebtedness of such Credit Party to the Creditors, but without
affecting or impairing in any manner the liability of such Guarantor under the
other provisions of this Guaranty. Prior to the transfer by any Guarantor of any
note or negotiable instrument evidencing any indebtedness of any Credit Party to
such Guarantor, such Guarantor shall mark such note or negotiable instrument
with a legend that the same is subject to this subordination. Without limiting
the generality of the foregoing, each guarantor hereby agrees with the Creditors
that it will not exercise any right of subrogation which it may at any time
otherwise have as a result of this Guaranty (whether contractual, under Section
509 of the Bankruptcy Code or otherwise) until all Guaranteed Obligations have
been irrevocably paid in full.
11. (a) Each Guarantor waives any right (except as shall be required
by applicable statute and cannot be waived) to require the Creditors to: (i)
proceed against any Credit Party, any other Guarantor, any other guarantor of
the Guaranteed Obligations or any other party; (ii) proceed against or exhaust
any security held from any Credit Party, any other Guarantor, any other
guarantor of the Guaranteed Obligations or any other party; or (iii) pursue any
other remedy in the Creditors' power whatsoever. Each Guarantor waives any
defense based on or arising out of any defense of any Credit Party, any other
Guarantor, any other guarantor of the Guaranteed Obligations or any other party
other than payment in full of the Guaranteed Obligations, including, without
limitation, any defense based on or arising out of the disability of such Credit
Party, any other Guarantor, any other guarantor of the Guaranteed Obligations or
any other party, or the unenforceability of the Guaranteed Obligations or any
part thereof from any cause, or the cessation from any cause of the liability of
such Credit Party other than payment in full of the Guaranteed Obligations. The
Creditors may, at their election, foreclose on any security held by the
Administrative Agent, the Collateral Agent or the other Creditors by one or more
judicial or nonjudicial sales (to the extent such sale is permitted by
applicable law), or exercise any other right or remedy the Creditors may have
against any Credit Party or any other party, or any security, without affecting
or impairing in any way the liability of any Guarantor hereunder except to the
extent the Guaranteed Obligations have been paid in full. Each Guarantor waives
any defense arising out of any such election by the Creditors, even though such
election operates to impair or extinguish any right of reimbursement or
subrogation or other right or remedy of such Guarantor against any Credit Party
or any other party or any security.
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(b) Each Guarantor waives all presentments, demands for performance,
protests and notices, including, without limitation, notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this Guaranty,
and notices of the existence, creation or incurring of new or additional
indebtedness. Each Guarantor assumes all responsibility for being and keeping
itself informed of each Credit Party's 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 which such Guarantor
assumes and incurs hereunder, and agrees that the Creditors shall have no duty
to advise any Guarantor of information known to them regarding such
circumstances or risks.
12. In order to induce the Lenders to make Loans and issue Letters
of Credit pursuant to the Credit Agreement, and in order to induce the Other
Creditors to execute, deliver and perform the Interest Rate Protection
Agreements or Other Hedging Agreements, each Guarantor represents, warrants and
covenants that:
(a) Such Guarantor (i) is a duly organized and validly existing
corporation partnership, or limited liability company in good standing
under the laws of the jurisdiction of its organization, (ii) has the
requisite corporate, partnership, or limited liability company power and
authority to own its property and assets and to transact the business in
which it is engaged and presently proposes to engage and (iii) is duly
qualified and is authorized to do business and is in good standing in all
jurisdictions where it is required to be so qualified, except where the
failure to be so qualified could not reasonably be expected to have a
material adverse effect on the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of the U.S.
Borrower and its Subsidiaries taken as a whole.
(b) Such Guarantor has the requisite corporate, partnership, or
limited liability company power and authority to execute, deliver and
carry out the terms and provisions of this Guaranty and each other Credit
Document to which it is a party and has taken all necessary corporate,
partnership, or limited liability company action to authorize the
execution, delivery and performance by it of each such Credit Document.
Such Guarantor has duly executed and delivered this Guaranty and each
other Credit Document to which it is a party and each such Credit Document
constitutes the legal, valid and binding obligation of such Guarantor
enforceable in accordance with its terms, except to the extent that the
enforceability hereof and thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and by equitable principles (regardless of
whether enforcement is sought in equity or at law).
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(c) Neither the execution, delivery or performance by such Guarantor
of this Guaranty or any other Credit Document to which it is a party, nor
compliance by it with the terms and provisions hereof and thereof (i) will
contravene any applicable provision of any law, statute, rule or
regulation, or any order, writ, injunction or decree of any court or
governmental instrumentality, (ii) will conflict or be inconsistent with
or result in any breach of, any of the terms, covenants, conditions or
provisions of, or constitute a default under or (other than pursuant to
the Security Documents) result in the creation or imposition of (or the
obligation to create or impose) any Lien upon any of the property or
assets of such Guarantor or any of its Subsidiaries pursuant to the terms
of any indenture, mortgage, deed of trust, loan agreement, credit
agreement or other material agreement or other instrument to which such
Guarantor is a party or by which it or any of its property or assets is
bound or to which it may be subject or (iii) will violate any provision of
the certificate of incorporation or by-laws (or equivalent organizational
documents) of such Guarantor.
(d) Except as specifically described in Schedule X to the Credit
Agreement, no order, consent, approval, license, authorization or
validation of, or filing, recording or registration with, or exemption by,
any governmental or public body or authority, or any subdivision thereof,
is required to authorize, or is required in connection with, (i) the
execution, delivery and performance of this Guaranty or any other Credit
Document to which such Guarantor is a party or (ii) the legality,
validity, binding effect or enforceability of this Guaranty or any other
Credit Document to which such Guarantor is a party.
(e) There are no actions, suits or proceedings pending or threatened
(i) with respect to this Guaranty or (ii) with respect to such Guarantor
that could reasonably be expected to have a material adverse effect on the
business, operations, property, assets, liabilities, condition (financial
or otherwise) or prospects of the U.S. Borrower and its Subsidiaries taken
as a whole.
13. Each Guarantor covenants and agrees that on and after the date
hereof and until the termination of the Total Commitments and all Interest Rate
Protection Agreements or Other Hedging Agreements and when no Note or Letter of
Credit remains outstanding and all Guaranteed Obligations have been paid in
full, such Guarantor shall take, or will refrain from taking, as the case may
be, all actions that are necessary to be taken or not taken so that no violation
of any provision, covenant or agreement contained in Section 8 or 9 of the
Credit Agreement, and so that no Default or Event of Default, is caused by the
actions of such Guarantor or any of its Subsidiaries.
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14. The Guarantors hereby jointly and severally agree to pay all
reasonable out-of-pocket costs and expenses of each Creditor in connection with
the enforcement of this Guaranty and any amendment, waiver or consent relating
hereto (including, without limitation, the reasonable fees and disbursements of
counsel (including in-house counsel) employed by any of the Creditors).
15. This Guaranty shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the Creditors and their
successors and assigns.
16. Neither this Guaranty nor any provision hereof may be changed,
waived, discharged or terminated except with the written consent of each
Guarantor directly affected thereby and with the written consent of either (x)
the Required Lenders (or to the extent required by Section 13.12 of the Credit
Agreement, with the written consent of each Lender) at all times prior to the
time at which the Total Commitments have terminated and all Credit Document
Obligations have been paid in full or (y) the holders of at least a majority of
the outstanding Other Obligations at all times after the time at which the Total
Commitments have terminated and all Credit Document Obligations have been paid
in full; provided, that any change, waiver, modification or variance affecting
the rights and benefits of a single Class (as defined below) of Creditors (and
not all Creditors in a like or similar manner) shall require the written consent
of the Requisite Creditors (as defined below) of such Class of Creditors (it
being understood that the addition or release of any Guarantor hereunder shall
not constitute a change, waiver, discharge or termination affecting any
Guarantor other than the Guarantor so added or released). For the purpose of
this Guaranty the term "Class" shall mean each class of Creditors, i.e., whether
(x) the Lender Creditors as holders of the Credit Document Obligations or (y)
the Other Creditors as the holders of the Other Obligations. For the purpose of
this Guaranty, the term "Requisite Creditors" of any Class shall mean (x) with
respect to the Credit Document Obligations, the Required Lenders and (y) with
respect to the Other Obligations, the holders of at least a majority of all
obligations outstanding from time to time under the Interest Rate Protection
Agreements or Other Hedging Agreements.
17. Each Guarantor acknowledges that an executed (or conformed) copy
of each of the Credit Documents, as same exist on the Initial Borrowing Date,
have been made available to its principal executive officers and such officers
are familiar with the contents thereof.
18. In addition to any rights now or hereafter granted under
applicable law (including, without limitation, Section 151 of the New York
Debtor and Creditor Law) and not by way of limitation of any such rights, upon
the occurrence and during the continuance of an Event of Default (such term to
mean and include any "Event of Default" as defined in the Credit Agreement or
any payment default under any Interest Rate Protection Agree-
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ment or Other Hedging Agreement continuing after any applicable grace period),
each Creditor is hereby authorized at any time or from time to time, without
notice to any Guarantor or to any other Person, any such notice being expressly
waived, to set off and to appropriate and apply any and all deposits (general or
special) and any other indebtedness at any time held or owing by such Creditor
to or for the credit or the account of such Guarantor, against and on account of
the obligations and liabilities of such Guarantor to such Creditor under this
Guaranty, irrespective of whether or not such Creditor shall have made any
demand hereunder and although said obligations, liabilities, deposits or claims,
or any of them, shall be contingent or unmatured.
19. All notices, requests, demands or other communications pursuant
hereto shall be deemed to have been duly given or made when delivered to the
Person to which such notice, request, demand or other communication is required
or permitted to be given or made under this Guaranty, addressed to such party at
(i) in the case of any Lender Creditor, as provided in the Credit Agreement,
(ii) in the case of any Guarantor, at 6601 South Bermuda Road, Las Vegas, Nevada
89119, Attention: Scott Schweinfurth, Telephone No.: (702) 896-7700, Telecopier
No.: (702) 263-5636 and (iii) in the case of any Other Creditor, at such address
as such Other Creditor shall have specified in writing to the Guarantors; or in
any case at such other address as any of the Persons listed above may hereafter
notify the others in writing.
20. If claim is ever made upon any Creditor for repayment or
recovery of any amount or amounts received in payment or on account of any of
the Guaranteed Obligations and any of the aforesaid payees repays all or part of
said amount by reason of (i) any judgment, decree or order of any court or
administrative body having jurisdiction over such payee or any of its property
or (ii) any settlement or compromise of any such claim effected by such payee
with any such claimant (including any Credit Party), then and in such event each
Guarantor agrees that any such judgment, decree, order, settlement or compromise
shall be binding upon such Guarantor, notwithstanding any revocation hereof or
other instrument evidencing any liability of any Credit Party, and such
Guarantor shall be and remain liable to the aforesaid payees hereunder for the
amount so repaid or recovered to the same extent as if such amount had never
originally been received by any such payee.
21. (A) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE
CREDITORS AND OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES
OF CONFLICT OF LAWS). Any legal action or proceeding with respect to this
Guaranty or any other Credit Document to which such Guarantor is a party may be
brought in the courts of the State of New York or of the United States of
America for the Southern District of New
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York, and, by execution and delivery of this Guaranty, each Guarantor hereby
irrevocably accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Each Guarantor hereby
further irrevocably waives any claim that any such courts lack jurisdiction over
such Guarantor, and agrees not to plead or claim, in any legal action or
proceeding with respect to this Agreement or any other Credit Document brought
in any of the aforesaid courts, that any such court lacks jurisdiction over such
Guarantor. Each Guarantor further irrevocably consents to the service of process
out of any of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
such Guarantor at its address set forth opposite its signature below, such
service to become effective 30 days after such mailing. Each Guarantor hereby
irrevocably waives any objection to such service of process and further
irrevocably waives and agrees not to plead or claim in any action or proceeding
commenced hereunder or under any other Credit Document that service of process
was in any way invalid or ineffective. Nothing herein shall affect the right of
any of the Creditors to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against each Guarantor in any
other jurisdiction.
(B) Each Guarantor hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid actions
or proceedings arising out of or in connection with this Guaranty or any other
Credit Document to which such Guarantor is a party brought in the courts
referred to in clause (A) above and hereby further irrevocably waives and agrees
not to plead or claim in any such court that such action or proceeding brought
in any such court has been brought in an inconvenient forum.
(C) EACH GUARANTOR AND EACH CREDITOR (BY ITS ACCEPTANCE OF THE
BENEFITS OF THIS GUARANTY) HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS GUARANTY, THE OTHER CREDIT DOCUMENTS TO WHICH SUCH GUARANTOR IS A PARTY OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
22. In the event that all of the capital stock of one or more
Guarantors is sold or otherwise disposed of (but not to the U.S. Borrower or a
Subsidiary thereof) or liquidated in compliance with the requirements of Section
9.02 of the Credit Agreement (or such sale or other disposition has been
approved in writing by the Required Lenders (or all Lenders if required by
Section 13.12 of the Credit Agreement)) and the proceeds of such sale,
disposition or liquidation are applied in accordance with the provisions of the
Credit Agreement, to the extent applicable, such Guarantor shall (so long as
such Guarantor is contemporaneously released from any guaranty by it of the New
Senior Subordinated Notes)
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be released from this Guaranty and this Guaranty shall, as to each such
Guarantor or Guarantors, terminate, and have no further force or effect (it
being understood and agreed that the sale of one or more Persons (but not to the
U.S. Borrower or a Subsidiary thereof) that own, directly or indirectly, all of
the capital stock or partnership or limited liability company interests of any
Guarantor shall be deemed to be a sale of such Guarantor for the purposes of
this Section 22).
23. This Guaranty may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument. A set of counterparts executed by all
the parties hereto shall be lodged with the Guarantors and the Administrative
Agent.
24. All payments made by any Guarantor hereunder will be made
without setoff, counterclaim or other defense and on the same basis as payments
made by the Borrowers pursuant to Sections 4.03 and 4.04 of the Credit
Agreement.
25. It is understood and agreed that any Subsidiary of the U.S.
Borrower that is required to execute a counterpart of this Guaranty pursuant to
the Credit Agreement shall automatically become a Guarantor hereunder by
executing a counterpart hereof and delivering the same to the Administrative
Agent.
26. At any time a payment in respect of the Guaranteed Obligations
is made under this Guaranty, the right of contribution of each Guarantor against
each other Guarantor shall be determined as provided in the immediately
following sentence, with the right of contribution of each Guarantor to be
revised and restated as of each date on which a payment (a "Relevant Payment")
is made on the Guaranteed Obligations under this Guaranty. At any time that a
Relevant Payment is made by a Guarantor that results in the aggregate payments
made by such Guarantor in respect of the Guaranteed Obligations to and including
the date of the Relevant Payment exceeding such Guarantor's Contribution
Percentage (as defined below) of the aggregate payments made by all Guarantors
in respect of the Guaranteed Obligations to and including the date of the
Relevant Payment (such excess, the "Aggregate Excess Amount"), each such
Guarantor shall have a right of contribution against each other Guarantor who
has made payments in respect of the Guaranteed Obligations to and including the
date of the Relevant Payment in an aggregate amount less than such other
Guarantor's Contribution Percentage of the aggregate payments made to and
including the date of the Relevant Payment by all Guarantors in respect of the
Guaranteed Obligations (the aggregate amount of such deficit, the "Aggregate
Deficit Amount") in an amount equal to (x) a fraction the numerator of which is
the Aggregate Excess Amount of such Guarantor and the denominator of which is
the Aggregate Excess Amount of all Guarantors multiplied by (y) the Aggregate
Deficit Amount of such other
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Guarantor. A Guarantor's right of contribution pursuant to the preceding
sentences shall arise at the time of each computation, subject to adjustment to
the time of any subsequent computation; provided, that no Guarantor may take any
action to enforce such right until the Guaranteed Obligations have been paid in
full and the Total Commitment and all Letters of Credit have been terminated, it
being expressly recognized and agreed by all parties hereto that any Guarantor's
right of contribution arising pursuant to this Section 26 against any other
Guarantor shall be expressly junior and subordinate to such other Guarantor's
obligations and liabilities in respect of the Guaranteed Obligations and any
other obligations owing under this Guaranty. As used in this Section 26: (i)
each Guarantor's "Contribution Percentage" shall mean the percentage obtained by
dividing (x) the Adjusted Net Worth (as defined below) of such Guarantor by (y)
the aggregate Adjusted Net Worth of all Guarantors; (ii) the "Adjusted Net
Worth" of each Guarantor shall mean the greater of (x) the Net Worth (as defined
below) of such Guarantor and (y) zero; and (iii) the "Net Worth" of each
Guarantor shall mean the amount by which the fair salable value of such
Guarantor's assets on the date of any Relevant Payment exceeds its existing
debts and other liabilities (including contingent liabilities, but without
giving effect to any Guaranteed Obligations arising under this Guaranty) on such
date. All parties hereto recognize and agree that, except for any right of
contribution arising pursuant to this Section 26, each Guarantor who makes any
payment in respect of the Guaranteed Obligations shall have no right of
contribution or subrogation against any other Guarantor in respect of such
payment. Each of the Guarantors recognizes and acknowledges that the rights to
contribution arising hereunder shall constitute an asset in favor of the party
entitled to such contribution. In this connection, each Guarantor has the right
to waive its contribution right against any Guarantor to the extent that after
giving effect to such waiver such Guarantor would remain solvent, in the
determination of the Required Lenders.
27. Each Creditor and each Guarantor hereby confirms that it is its
intention that this Guaranty not constitute a fraudulent transfer or conveyance
for purposes of the Bankruptcy Code, the Uniform Fraudulent Conveyance Act or
any similar Federal or state law. To effectuate the foregoing intention, each
Creditor and each Guarantor hereby irrevocably agrees that the Guaranteed
Obligations guaranteed by each Guarantor shall be limited to such amount as
will, after giving effect to such maximum amount and all of such Guarantor's
other (contingent or otherwise) liabilities that are relevant under such laws,
and after giving effect to any rights to contribution pursuant to any agreement
providing for an equitable contribution among the Guarantors (including pursuant
to Section 26 hereof), result in the Guaranteed Obligations of such Guarantor in
respect of such maximum amount not constituting a fraudulent transfer or
conveyance.
28. (a) The Guarantors' obligations hereunder to make payments in
the Applicable Currency (the "Obligation Currency") shall not be discharged or
satisfied by any tender or recovery pursuant to any judgment expressed in or
converted into any currency
<PAGE> 284
EXHIBIT H-1
Page 14
other than the Obligation Currency, except to the extent that such tender or
recovery results in the effective receipt by the respective Creditor of the full
amount of the Obligation Currency expressed to be payable to such Creditor under
this Guaranty. If for the purpose of obtaining or enforcing judgment against any
Guarantor in any court or in any jurisdiction, it becomes necessary to convert
into or from any currency other than the Obligation Currency (such other
currency being hereinafter referred to as the "Judgment Currency") an amount due
in the Obligation Currency, the conversion shall be made, at the Deutsche Mark
Equivalent or the Dollar Equivalent thereof, as the case may be, and, in the
case of other currencies the rate of exchange (as quoted by the Administrative
Agent or if the Administrative Agent does not quote a rate of exchange on such
currency, by a known dealer in such currency designated by the Administrative
Agent) determined, in each case, as on the day immediately preceding the day on
which the judgment is given (such Business Day being hereinafter referred to as
the "Judgment Currency Conversion Date").
(b) If there is a change in the rate of exchange prevailing between
the Judgment Currency Conversion Date and the date of actual payment of the
amount due, the Guarantors covenant and agree to pay, or cause to be paid, such
additional amounts, if any (but in any event not a lesser amount), as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the rate of exchange prevailing on the date of payment, will
produce the amount of the Obligation Currency which could have been purchased
with the amount of Judgment Currency stipulated in the judgment of judicial
award at the rate of exchange prevailing on the Judgment Currency Conversion
Date.
(c) For purposes of determining the Deutsche Mark Equivalent or the
Dollar Equivalent or any other rate of exchange for this Section, such amounts
shall include any premium and costs payable in connection with the purchase of
the Obligation Currency.
29. Notwithstanding anything to the contrary contained elsewhere in
this Guaranty, the parties hereto hereby agree that if at any time RCVP is a
Guarantor (whether as an initial signatory hereto or as a result of its
execution of a counterpart hereof as contemplated by Section 25 after the
Initial Borrowing Date), then, and for so long as RCVP is not a Wholly-Owned
Subsidiary of the U.S. Borrower, the obligations of RCVP pursuant to this
Guaranty (including without limitation pursuant to Sections 1 and 2) shall be
limited from time to time the maximum amount permitted to be guaranteed by it in
accordance with the terms of the Second Amended and Restated Agreement of
Limited Partnership, dated as of March 29, 1995 (the "RCVP Partnership
Agreement") entered into by United Gaming Rainbow, as general partner, and The
Rainbow Casino Corporation, as limited partner, as same is in effect from time
to time; provided that the relevant restrictions which would apply to amounts
guaranteed by RCVP shall not be made more restrictive (from the point of view of
Creditors) than those as in effect on the Initial Borrowing Date.
<PAGE> 285
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be
executed and delivered as of the date first above written.
ALLIANCE HOLDING COMPANY,
as a Guarantor
By /s/ Scott Schweinfurth
------------------------------
Title: Treasurer
APT GAMES, INC.,
as a Guarantor
By /s/ Scott Schweinfurth
------------------------------
Title: Treasurer
UNITED COIN MACHINE CO.,
as a Guarantor
By /s/ Scott Schweinfurth
------------------------------
Title: Treasurer
PLANTATION INVESTMENTS, INC.,
as a Guarantor
By /s/ Scott Schweinfurth
------------------------------
Title: Treasurer
FOREIGN GAMING VENTURES, INC.,
as a Guarantor
By /s/ Scott Schweinfurth
------------------------------
Title: Treasurer
<PAGE> 286
LOUISIANA VENTURES, INC.,
as a Guarantor
By /s/ Scott Schweinfurth
------------------------------
Title: Treasurer
UNITED GAMING RAINBOW,
as a Guarantor
By /s/ Scott Schweinfurth
------------------------------
Title: Treasurer
NATIVE AMERICAN INVESTMENT,
INC., as a Guarantor
By /s/ Scott Schweinfurth
------------------------------
Title: Treasurer
BALLY GAMING INTERNATIONAL,
INC., as a Guarantor
By /s/ Scott Schweinfurth
------------------------------
Title: Treasurer
BALLY GAMING, INC.,
as a Guarantor
By /s/ Scott Schweinfurth
------------------------------
Title: Treasurer
<PAGE> 287
Accepted and Agreed to:
CREDIT SUISSE FIRST BOSTON,
as Administrative Agent
By /s/ Sean S. Bernard
---------------------------------
Title: Assistant Vice President
By /s/ Edward E. Barr
---------------------------------
Title: Associate
<PAGE> 288
EXHIBIT H-2
<PAGE> 289
EXHIBIT H-2
[CONFORMED AS EXECUTED]
GERMAN SUBSIDIARIES GUARANTY
GUARANTY, dated as of August 8, 1997 (as amended, modified or
supplemented from time to time, the "Guaranty"), made by each of the undersigned
(each a "Guarantor" and collectively, the "Guarantors"). Except as otherwise
defined herein, terms used herein and defined in the Credit Agreement (as
defined below) shall be used herein as therein defined.
WHEREAS, (i) Alliance Gaming Corporation, Las Vegas, USA (the
"US-Borrower"), (ii) Bally Wulff Vertriebs GmbH, Hannover, Germany (hereinafter
the "Bally Wulff Vertrieb"), (iii) Bally Wulff Automaten GmbH, Berlin, Germany
(hereinafter the "Bally Wulff Automaten") (Bally Wulff Vertrieb and Bally Wulff
Automaten the "German Borrowers", the plural form including the singular; the
US-Borrower and the German Borrowers together the "Borrowers"), the financial
institutions from time to time party thereto (the "Lenders") and Credit Suisse
First Boston, as Administrative Agent (the "Agent," and together with the
Lenders, the "Lender Creditors"), have entered into a credit agreement, dated as
of August 8, 1997 (as amended, modified or supplemented from time to time, the
"Credit Agreement");
WHEREAS, in the Credit Agreement the Lender Creditors, among others,
severally agreed to grant to the German Borrowers Revolving Loans of up to the
amount of $55,000,000 (taking the Deutsche Mark Equivalent thereof) (the
"Loans");
WHEREAS, the German Borrowers may enter into Interest Rate
Protection Agreements and/or Hedging Agreements with one or all of the Lender
Creditors or any affiliate thereof (hereinafter the "Other Creditors" and
together with the Lender Creditors the "Creditors") (hereinafter the "Additional
Agreements").
WHEREAS, it is a condition precedent to the making of the Loans and
the issuance of, and participation in, German Letters of Credit under the Credit
Agreement that each German Subsidiary Guarantor shall have executed and
delivered this Guaranty in order to secure the obligations of the German
Borrowers under the Credit Agreement and the Additional Agreements.
<PAGE> 290
EXHIBIT H-2
Page 2
WHEREAS, each Guarantor will obtain benefits from the incurrence of
the Loans by, and the issuance of German Letters of Credit to, the German
Borrowers under the Credit Agreement and from the entering into Additional
Agreements and, accordingly, desires to execute this Guaranty in order to
satisfy the conditions described in the preceding paragraph and to induce the
Lenders to make Loans to, and to issue and participate in German Letters of
Credit for the account of the German Borrowers;
NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to each Guarantor, the receipt and sufficiency of which are hereby
acknowledged, each Guarantor hereby makes the following representations and
warranties to the Creditors and hereby covenants and agrees with each Creditor
as follows:
Section 1
Guaranty
1. Each Guarantor, jointly and severally, irrevocably and
unconditionally guarantees (i) to the Lender Creditors the full and prompt
payment when due (whether at the stated maturity, by acceleration or otherwise)
of (x) the principal of and interest on the Loans made to the German Borrowers
under the Credit Agreement and all reimbursement obligations and Unpaid Drawings
with respect to German Letters of Credit issued under the Credit Agreement, and
(y) all other obligations and liabilities owing by any German Borrowers to the
Lender Creditors under the Credit Agreement or an other Credit Document to which
any German Borrower is a party (including, without limitation, indemnities, Fees
and interest thereon) whether now existing or hereafter incurred under, arising
out of or in connection with the Credit Agreement or any other Credit Document
and the due performance and compliance with all of the terms, conditions and
agreements contained in such Credit Documents by any German Borrower (all such
principal, interest, liabilities and obligations being herein collectively
called the "Credit Document Obligations") and (ii) to each Other Creditor the
full and prompt payment when due (whether at the stated maturity, by
acceleration or otherwise) of all obligations and liabilities owing by any
German Borrower under any Additional Agreement, whether now in existence or
hereafter arising and the due performance and compliance by any German
Subsidiary with all of the terms, conditions and agreements contained in the
Additional Agreements (all such obligations and liabilities being herein
collectively called the "Other Obligations").
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EXHIBIT H-2
Page 3
2. In case the Credit Agreement should be void, each Guarantor,
jointly and severally, irrevocably and unconditionally guarantees any obligation
of the German Borrowers created by applicable law, including, but without
limitation the repayment of Loans already paid out to the German Borrowers
(those obligations together with the Credit Document Obligations and the Other
Obligations the "Guaranteed Obligations").
3. Each Guarantor, jointly and severally, unconditionally and
irrevocably, guarantees any and all Guaranteed Obligations of the German
Borrowers to the Creditors whether or not due or payable by the German Borrowers
upon the occurrence in respect of the German Borrowers of any of the events
specified in Section 10 of the Credit Agreement, and unconditionally and
irrevocably, jointly and severally, promises to pay such Guaranteed Obligations
to the Creditors, on demand, in lawful money of the Federal Republic of Germany.
4. Each Guarantor understands, agrees and confirms that the
guaranties created hereunder are payable on demand and that the Creditors may
enforce this Guaranty up to the full amount of the Guaranteed Obligations
against each Guarantor without proceeding against any other Guarantor, one of
the German Borrowers, against any security for the Guaranteed Obligations, or
under any other guaranty covering all or a portion of the Guaranteed
Obligations. All payments by each Guarantor under this Guaranty shall be made on
the same basis as payments by the German Borrowers under Section 4 of the Credit
Agreement.
5. The total amount collectable by the Creditors hereunder from
those Guarantors which are subsidiaries of each German Subsidiary, (i) shall not
exceed the total amount of free reserves plus profits carried forward of this
company, and (ii) will meet the restrictions of SectionSection 30, 31 of the
German Act on Limited Liability Companies.
Section 2
Severability
1. The liability of each Guarantor hereunder is exclusive and
independent of any security for or other guaranty of the indebtedness of the
German Borrowers whether executed by such Guarantor, any other Guarantor, any
other guarantor of the German Borrowers or by any other party, and the liability
of each
<PAGE> 292
EXHIBIT H-2
Page 4
Guarantor hereunder shall not be affected or impaired by (a) any direction as to
application of payment by the German Borrowers or by any other party, (b) any
other continuing or other guaranty, undertaking or maximum liability of a
guarantor or of any other party as to the indebtedness of the German Borrowers,
(c) any payment on or in reduction of any such other guaranty or undertaking,
(d) any dissolution, termination or increase, decrease or change in personnel by
the German Borrowers or (e) any payment made to any Creditor on the indebtedness
which any Creditor repays to the German Borrowers pursuant to a court order in
any bankruptcy, reorganization, arrangement, moratorium or other debtor relief
proceeding and each Guarantor waives any right to the deferral or modification
of its obligations hereunder by reason of any such proceeding.
2. The obligations of each Guarantor hereunder are independent of
the obligations of any other Guarantor, any other guarantor of the German
Borrowers or the German Borrowers, and a separate action or actions may be
brought and prosecuted against each Guarantor whether or not action is brought
against any other Guarantor, any other guarantor of the German Borrowers or the
German Borrowers and whether or not any other Guarantor, any other guarantor of
the German Borrowers or the German Borrowers be joined in any such action or
actions.
Section 3
Waiver
Each Guarantor hereby waives notice of acceptance of this Guaranty
and notice of any liability to which it may apply, and waives promptness,
diligence, presentment, demand of payment, protest, notice of dishonor or
nonpayment of any such liabilities, suit or taking of other action by the Agent
or any other Creditor against, and any other notice to, any party liable thereon
(including such Guarantor or any other guarantor of the German Borrowers).
Section 4
Amendments to Guaranteed Obligations;
Independence of Guaranteed Obligations
<PAGE> 293
EXHIBIT H-2
Page 5
1. Any Creditor may at any time and from time to time without the
consent of, or notice to, any Guarantor, without incurring responsibility to
such Guarantor, without impairing or releasing the obligations of such Guarantor
hereunder, upon or without any terms or conditions and in whole or in part:
(a) change the manner, place or terms of payment of, and/or change
or extend the time of payment of, renew or alter, any of the Guaranteed
Obligations, any security therefor, or any liability incurred directly or
indirectly in respect thereof, and the guaranty herein made shall apply to
the Guaranteed Obligations as so changed, extended, renewed or altered;
(b) sell, exchange, release, surrender, realize upon or otherwise
deal with in any manner and in any order any property by whomsoever at any
time pledged or mortgaged to secure, or howsoever securing, the Guaranteed
Obligations or any liabilities (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and/or any offset
thereagainst;
(c) exercise or refrain from exercising any rights against the
German Borrowers, or others or otherwise act or refrain from acting;
(d) release or substitute any one or more endorsers, guarantors, any
German Borrower or other obligors;
(e) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of any
liability (whether due or not) of the German Subsidiaries to creditors of
the German Subsidiaries;
(f) apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of the German Subsidiaries to the Creditors
regardless of what liabilities of the German Subsidiaries remain unpaid;
(g) consent to or waive any breach of, or any act, omission or
default under, any of the Additional Agreements, the Credit Documents or
any of the instruments or agreements referred to therein, or otherwise
amend, modify or supplement any of the Additional Agreements, Credit
Documents or any of such other instruments or agreements; and/or
<PAGE> 294
EXHIBIT H-2
Page 6
(h) act or fail to act in any manner referred to in this Guaranty
which may deprive such Guarantor of its right to subrogation against any
German Subsidiary to recover full indemnity for any payments made pursuant
to this Guaranty.
2. No invalidity, irregularity or unenforceability of all or any
part of the Guaranteed Obligations or of any security therefor shall affect,
impair or be a defense to this Guaranty, and this Guaranty shall be primary,
absolute and unconditional notwithstanding the occurrence of any event or the
existence of any other circumstances which might constitute a discharge of a
surety or guarantor of the German Borrowers except payment in full of the
Guaranteed Obligations.
3. This Guaranty is a continuing one and all liabilities to which it
applies or may apply under the terms hereof shall be conclusively presumed to
have been created in reliance hereon. No failure or delay on the part of any
Creditor in exercising any right, power or privilege hereunder shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
expressly specified are cumulative and not exclusive of any rights or remedies
which any Creditor would otherwise have. No notice to or demand on any Guarantor
in any case shall entitle such Guarantor to any other further notice or demand
in similar or other circumstances or constitute a waiver of the rights of any
Creditor to any other or further action in any circumstances without notice or
demand. It is not necessary for any Creditor to inquire into the capacity or
powers of the German Borrowers or any of their respective Subsidiaries or the
officers, directors, partners or agents acting or purporting to act on their
behalf, and any indebtedness made or created in reliance upon the professed
exercise of such powers shall be guaranteed hereunder.
Section 5
Subordination of Rank; Guaranty on Demand
1. Any indebtedness of any German Subsidiary now or hereafter held
by any Guarantor is hereby subordinated to the indebtedness of such German
Subsidiary to the Creditors; and such indebtedness of such German Subsidiary to
any Guarantor, if the Agent, after an Event of Default has occurred, so
requests, shall be collected, enforced and received by such Guarantor as trustee
for the Creditors and be paid over
<PAGE> 295
EXHIBIT H-2
Page 7
to the Creditors on account of the indebtedness of such German Subsidiary to the
Creditors, but without affecting or impairing in any manner the liability of
such Guarantor under the other provisions of this Guaranty. Prior to the
transfer by any Guarantor of any note or negotiable instrument evidencing any
indebtedness of any German Subsidiary to such Guarantor, such Guarantor shall
mark such note or negotiable instrument with a legend that the same is subject
to this subordination.
2. Each Guarantor waives any right (except as shall be required by
applicable statute and cannot be waived) to require the Creditors to: (i)
proceed against the German Borrowers, any other Guarantor, any other guarantor
of the Guaranteed Obligations or any other party; (ii) proceed against or
exhaust any security held from any German Subsidiary, any other Guarantor, any
other guarantor of the Guaranteed Obligations or any other party; or (iii)
pursue any other remedy in the Creditors' power whatsoever. Each Guarantor
waives, to the extent permitted by applicable law, any defense based on or
arising out of any defense of the German Subsidiaries, any other Guarantor, any
other guarantor of the Guaranteed Obligations or any other party other than
payment in full of the Guaranteed Obligations, including, without limitation,
any defense based on or arising out of the disability of the German
Subsidiaries, any other Guarantor, any other guarantor of the Guaranteed
Obligations or any other party, or the unenforceability of the Guaranteed
Obligations or any part thereof from any cause, or the cessation from any cause
of the liability of the German Subsidiaries other than payment in full of the
Guaranteed Obligations. The Creditors may, at their election, foreclose on any
security held by the Agent, the Collateral Agent or the other Creditors by one
or more judicial or nonjudicial sales, whether or not every aspect of any such
sale is commercially reasonable (to the extent such sale is permitted by
applicable law), or exercise any other right or remedy the Creditors may have
against the German Subsidiaries or any other party, or any security, without
affecting or impairing in any way the liability of any Guarantor hereunder
except to the extent the Guaranteed Obligations have been paid in full.
3. Each Guarantor waives, to the extent permitted by applicable law,
all presentments, demands for performance, protests and notices, including,
without limitation, notices of nonperformance, notices of protest, notices of
dishonor, notices of acceptance of this Guaranty, and notices of the existence,
creation or incurring of new or additional indebtedness. Each Guarantor assumes
all responsibility for being and keeping itself informed of each German
Subsidiary's 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 which such Guarantor assumes
<PAGE> 296
EXHIBIT H-2
Page 8
and incurs hereunder and agrees that the Creditors shall have no duty to advise
any Guarantor of information known to them regarding such circumstances or
risks.
4. Until such time as the Guaranteed Obligations have been paid in
full in cash or Cash Equivalents, each Guarantor hereby waives all rights of
subrogation which it may at any time otherwise have as a result of this Guaranty
(whether contractual, under applicable law, or otherwise) to the claims of the
Creditors against the German Subsidiaries, any other Guarantor or any other
guarantor of the Guaranteed Obligations and all contractual, statutory or common
law rights of reimbursement, contribution or indemnity from the German
Subsidiaries or any other Guarantor which it may at any time otherwise have as a
result of this Guaranty.
Section 6
Warranties
In order to induce the Bank Creditors to make Loans and issue German Letter of
Credit pursuant to the Credit Agreement, and in order to induce the Other
Creditors to execute, deliver and perform the Additional Agreements, each
Guarantor represents, warrants and covenants that:
1. Such Guarantor (i) is a duly organized and validly existing
limited partnership or limited liability company in good standing under the laws
of Germany, (ii) has the requisite power and authority to own its property and
assets and to transact the business in which it is engaged and presently
proposes to engage and (iii) is duly qualified and is authorized to do business
and is in good standing in all jurisdictions where it is required to be so
qualified, except where the failure to be so qualified could not reasonably be
expected to have a material adverse effect on the business, operations,
property, assets, liabilities, condition (financial or otherwise) or prospects
of the German Borrowers and the other German Subsidiaries taken as a whole.
2. Such Guarantor has the requisite power and authority to execute,
deliver and carry out the terms and provisions of the Guaranty and each other
Credit Documents to which it is a party and has taken all necessary action to
authorize the execution, delivery and performance by it of each such Credit
Document. Such Guarantor has duly executed and delivered this Guaranty and each
other Credit Document to which it is party and each such Credit Document
constitutes the legal, valid and binding obligation of such Guarantor
enforceable in accordance with its terms,
<PAGE> 297
EXHIBIT H-2
Page 9
except to the extent that the enforceability hereof and thereof may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar law affecting creditors' rights generally.
3. Neither the execution, delivery or performance of such Guarantor
of this Guaranty or any other Credit Document to which it is a party, nor
compliance by it with the terms and provisions hereof and thereof (i) will
contravene any applicable provision of any law, statute, rule or regulation, or
any order, writ, injunction or decree of any court or governmental
instrumentality, (ii) will conflict or be inconsistent with or result in any
breach of, any of the terms, covenants, conditions or provisions of, or
constitute a default under or (other than pursuant to the Security Documents)
result in the creation or imposition of (or the obligation to create or impose)
any Lien upon any of the property or assets of such Guarantor or any of its
Subsidiaries pursuant to the terms of an indenture, mortgage, loan agreement,
credit agreement or other material agreement or other instrument to which such
Guarantor is a party or by which it or any property or assets is bound or to
which it may be subject or (iii) will violate any provisions of the by-laws of
such Guarantor.
4. No order, consent, approval, license, authorization or validation
of, or filing recording or registration with, or exemption by, any governmental
or public body or authority, or any subdivision thereof, is required to
authorize, or is required in connection with, (i) the execution, delivery and
performance of this Guaranty, or any other Credit Document to which such
Guarantor is a party or (ii) the legality, validity, binding effect or
enforceability of this Guaranty or any other Credit Document to which such
Guarantor is a party.
5. There are no actions, suits or proceedings pending or threatened
(i) with respect to this Guaranty or (ii) with respect to such Guarantor that
could reasonably be expected to have a material adverse effect on the business,
operations, property, assets, liabilities, condition (financial or otherwise) or
prospects of the German Borrowers and the other German Subsidiaries taken as a
whole.
Section 7
Payments
1. If and to the extent that any Guarantor makes any payment to any
Creditor or to any other Person pursuant to or in respect of this Guaranty, any
claim
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Page 10
which such Guarantor may have against any German Subsidiary by reason thereof
shall be subject and subordinate to the prior payment in full of the Guaranteed
Obligations to each Creditor. Prior to the transfer by any Guarantor of any note
or negotiable instrument evidencing any indebtedness of the German Borrowers to
such Guarantor, such Guarantor shall mark such note or negotiable instrument
with a legend that the same is subject to this subordination.
2. Each Guarantor covenants and agrees that on and after the date
hereof and until the termination of the Total Deutsche Mark Revolving Loan
Commitment and when no Deutsche Mark Revolving Notes or German Letters of Credit
remain outstanding and all Guaranteed Obligations have been paid in full, such
Guarantor shall take, or will refrain from taking, as the case may be, all
actions that are necessary to be taken or not taken so that no violation of any
provision, covenant or agreement contained in Section 7, 8 or 9 of the Credit
Agreement, and so that no Event of Default, is caused by the actions of such
Guarantor or any of its Subsidiaries.
3. The Guarantors hereby jointly and severally agree to pay, to the
extent not paid pursuant to Section 13.01 of the Credit Agreement, all
reasonable out-of-pocket costs and expenses of each Lender Creditor in
connection with the enforcement of this Guaranty and any amendment, waiver or
consent relating hereto (including, without limitation, the reasonable fees and
disbursements of counsel employed by any of the Lender Creditors).
Section 8
Miscellaneous
1. This Guaranty shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the Creditors and their
successors and assigns.
2. Neither this Guaranty nor any provision hereof may be changed,
waived, discharged or terminated except with the written consent of each
Guarantor directly affected thereby and with the written consent of either (x)
the Required Lenders (or to the extent required by Section 13.12 of the Credit
Agreement, with the written consent of each Lender) at all times prior to the
time at which the Total Revolving Loan Commitment has terminated and all Credit
Document Obligations has been paid in full or (y) the holders of at least a
majority of the outstanding Other Obligations at
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all times after the time at which the Total Revolving Loan Commitment has
terminated and all Credit Document Obligations has been paid in full; provided
that any change, waiver, modification or variance affecting the rights and
benefits of a single Class (as defined below) of Creditors (and not all
Creditors in a like or similar manner, shall require the written consent of the
Requisite Creditors (as defined below) of such Class of Creditors) (it being
understood that the addition or release of any Guarantor hereunder shall not
constitute a change, waiver, discharge or termination affecting any Guarantor
other than the Guarantor so added or released). For the purpose of this Guaranty
the term "Class" shall mean each class of Creditors, i.e., whether (x) the
Lender Creditors as holders of the Credit Document Obligations or (y) the Other
Creditors as the holders of the Other Obligations. For purposes of this
Guaranty, the term "Requisite Creditors" of any Class shall mean (x) with
respect to the Credit Document Obligations, the Required Lenders and (y) with
respect to the Other Obligations, the holders of at least a majority of all
obligations outstanding from time to time under the Additional Agreements.
3. Each Guarantor acknowledges that an executed (or conformed) copy
of each of the Credit Documents and the Additional Agreements has been made
available to its principal executive officers and such officers are familiar
with the contents thereof.
4. In addition to any rights now or hereafter granted under
applicable law (including, without limitation, Section 151 of the New York
Debtor and Bank Creditor Law) and not by way of limitation of any such rights,
upon the occurrence and during the continuance of an Event of Default (such term
to mean and include any "Event of Default" as defined in the Credit Agreement or
any payment default under any Additional Agreement continuing after any
applicable grace period), each Creditor is hereby authorized at any time or from
time to time, without notice to any Guarantor or to any other Person, any such
notice being expressly waived, to set off and to appropriate and apply any and
all deposits (general or special) and any other indebtedness at any time held or
owing by such Creditor to or for the credit or the account of such Guarantor,
against and on account of the obligations and liabilities of such Guarantor to
such Creditor under this Guaranty, irrespective of whether or not such Creditor
shall have made any demand hereunder and although said obligations, liabilities,
deposits or claims, or any of them, shall be contingent or unmatured. Each
Creditor agrees to promptly notify the relevant Guarantor after any such set off
and application, provided, however, that the failure to give such notice shall
not affect the validity of such set off and application.
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5. All notices, requests, demands or other communications pursuant
hereto shall be deemed to have been duly given or made when delivered to the
Person to which such notice, request, demand or other communication is required
or permitted to be given or made under this Guaranty, addressed to such party at
(i) in the case of any Lender Creditor, as provided in the Credit Agreement,
(ii) in the case of any Guarantor, at its address set forth in Annex A attached
hereto and (iii) in the case of any Other Creditor, at such address as such
Other Creditor shall have specified in writing to the Guarantor; or in any case
at such other address as any of the Persons listed above may hereafter notify
the others in writing.
6. If claim is ever made upon any Creditor for repayment or recovery
of any amount or amounts received in payment or on account of any of the
Guaranteed Obligations and any of the aforesaid payees repays all or part of
said amount by reason of (i) any judgment, decree or order of any court or
administrative body having jurisdiction over such payee or any of its property
or (ii) any settlement or compromise of any such claim effected by such payee
with any such claimant (including the German Borrowers), then and in such event
each Guarantor agrees that any such judgment, decree, order, settlement or
compromise shall be binding upon such Guarantor, notwithstanding any revocation
hereof or other instrument evidencing any liability of any German Subsidiary,
and such Guarantor shall be and remain liable to the aforesaid payees hereunder
for the amount so repaid or recovered to the same extent as if such amount had
never originally been received by any such payee.
7. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE CREDITORS AND
OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding with
respect to this Guaranty may be brought in the courts of (x) the State of New
York or of the United States of America for the Southern District of New York,
or (y) the courts in and for Berlin, Germany, in the Federal Republic of Germany
and, by execution and delivery of this Guaranty, each Guarantor hereby
irrevocably accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Each Guarantor hereby
irrevocably designates, appoints and empowers CT Corporation with offices on the
date hereof at 1633 Broadway, New York, New York 10019 as its designee,
appointee and agent to receive, accept and acknowledge for and on its behalf,
and in respect of its property, service of any and all legal process, summons,
notices and documents which may be served in any such action or proceeding, if
for any reason such designee, appointee and agent shall cease to be available to
act as such, each Guarantor agrees to designate a new designee, appointee and
agent in New York City
<PAGE> 301
EXHIBIT H-2
Page 13
on the terms and for the purposes of this provision satisfactory to the Agent
under this Agreement. Each Guarantor irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to the Guarantor, at its address for notices pursuant to this Section
8, paragraph 7, such service to become effective 30 days after such mailing.
Nothing herein shall affect the right of any of the Creditors to serve process
in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against each Guarantor in any other jurisdiction.
8. Each Guarantor hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid actions
or proceedings arising out of or in connection with this Guaranty or any other
Credit Document brought in the courts referred to in clause (7) above and hereby
further irrevocably waives and agrees not to plead or claim in any such court
that such action or proceeding brought in any such court has been brought in an
inconvenient forum.
9. Each Guarantor hereby irrevocably waives all rights to a trial by
jury in any action, proceeding or counterclaim arising out of or relating to
this Guaranty, the other Credit Documents or the transactions contemplated
hereby or thereby.
10. In the event that all of the capital stock of one or more
Guarantors is sold or otherwise disposed of or liquidated in compliance with the
requirements of Section 9.02 of the Credit Agreement (or such sale or other
disposition has been approved in writing by the Required Lenders (or all the
Lenders if required by Section 13.12 of the Credit Agreement), in each case so
long as the respective sale is to a Person other than the U.S. Borrower or any
of its Subsidiaries and the proceeds of such sale, disposition or liquidation
are applied, to the extent applicable, in accordance with the provisions of the
Credit Agreement, such Guarantor shall be released from this Guaranty and this
Guaranty shall, as to each such Guarantor or Guarantors, terminate, and have no
further force or effect (it being understood and agreed that the sale of one or
more Persons (but not to the U.S. Borrower or any of its Subsidiaries) that own,
directly or indirectly, all of the capital stock or partnership interests of any
Guarantor shall be deemed to be a sale of such Guarantor for the purposes of
this paragraph 10). The foregoing provisions of this paragraph 10 shall not be
construed to limit the ability of a Guarantor to merge with another Person to
the extent permitted by the Credit Agreement.
<PAGE> 302
EXHIBIT H-2
Page 14
11. Each Guarantor, in addition to the subrogation rights it shall
have against the German Subsidiaries under applicable law as a result of any
payment it makes hereunder, shall also have a right of contribution against all
other Guarantors in respect of any such payment pro rata among same based on
their respective net fair value as enterprises, provided any such right of
contribution shall be subject and subordinate to the prior payment in full of
the Guaranteed Obligations (and such Guarantor's obligations in respect
thereof). It is the desire and intent of each Guarantor and the Creditors that
this Guaranty shall be enforced to the fullest extent permissible under the laws
and public policies applied in each jurisdiction in which enforcement is sought.
If and to the extent that the obligations of any Guarantor under this Guaranty
would, in the absence of this sentence, be adjudicated to be invalid or
unenforceable because of any applicable state or federal law relating to
fraudulent conveyances or transfers, then the amount of such Guarantor's
liability hereunder in respect of the Guaranteed Obligations shall be deemed to
be reduced ab initio to that maximum amount which would be permitted without
causing such Guarantor's obligations hereunder to be so invalidated.
12. The Creditors agree that this Guaranty may be enforced only by
the action of the Agent, in each case acting upon the instructions of the
Required Lenders and that no Creditor shall have any right individually to seek
to enforce or to enforce this Guaranty or to realize upon the security to be
granted by the Security Documents, it being understood and agreed that such
rights and remedies may be exercised by the Agent for the benefit of the
Creditors upon the terms of this Guaranty and the Security Documents. The
Creditors further agree that this Guaranty may not be enforced against any
director, officer or employee of any Guarantor.
13. All payments made by any Guarantor hereunder will be made
without setoff, counterclaim or other defense and on the same basis as payments
made by the German Borrowers pursuant to Section 4.03 and 4.04 of the Credit
Agreement.
14. This Guaranty may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument. A set of counterparts executed by all
the parties hereto shall be lodged with the Guarantors and the Agent.
<PAGE> 303
August 8, 1997 New York, NY /s/ Scott Schweinfurth
- ------------------------------ ------------------------------------
(time, place) (Alliance Automaten Verwaltungs
GmbH)
August 8, 1997 New York, NY /s/ Scott Schweinfurth
- ------------------------------ ------------------------------------
(time, place) (Alliance Automaten GmbH&Co. KG)
August 8, 1997 New York, NY /s/ Scott Schweinfurth
- ------------------------------ ------------------------------------
(time, place) (Geda AutomatenGrosshandel GmbH)
August 8, 1997 New York, NY /s/ Scott Schweinfurth
- ------------------------------ ------------------------------------
(time, place) (Erkens Vertriebs GmbH)
August 8, 1997 New York, NY /s/ Scott Schweinfurth
- ------------------------------ ------------------------------------
(time, place) (Westav Westdeutscher Automaten
Vertrieb GmbH)
August 8, 1997 New York, NY /s/ Scott Schweinfurth
- ------------------------------ ------------------------------------
(time, place) (Bally Gaming International GmbH)
Acknowledged and Agreed to by:
August 8, 1997 New York, NY /s/ Sean S. Bernard
- ------------------------------ ------------------------------------
(time, place) (Credit Suisse First Boston)
August 8, 1997 New York, NY /s/ Edward E. Barr
- ------------------------------ ------------------------------------
(time, place) (Credit Suisse First Boston)
<PAGE> 304
EXHIBIT I
<PAGE> 305
EXHIBIT I
[CONFORMED AS EXECUTED]
U.S. PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of August 8, 1997 (as amended,
modified or supplemented from time to time, this "Agreement"), made by each of
the undersigned (each a "Pledgor", and together with any entity that becomes a
party hereto pursuant to Section 23 hereof, the "Pledgors"), in favor of CREDIT
SUISSE FIRST BOSTON, as Collateral Agent (the "Pledgee"), for the benefit of the
Secured Creditors (as defined below). Except as otherwise defined herein, terms
used herein and defined in the Credit Agreement (as defined below) shall be used
herein as therein defined.
W I T N E S S E T H :
WHEREAS, Alliance Gaming Corporation, Bally Wulff Vertriebs GmbH,
Bally Wulff Automaten GmbH (each a "Borrower" and collectively, the
"Borrowers"), various lenders from time to time party thereto (the "Lenders"),
and Credit Suisse First Boston, as Administrative Agent (together with any
successor agent, the "Administrative Agent," and together with the Pledgee and
the Lenders, the "Lender Creditors"), have entered into a Credit Agreement,
dated as of August 8, 1997 (as amended, modified or supplemented from time to
time, the "Credit Agreement"), providing for the making of Loans to each
Borrower and the issuance of, and participation in, Letters of Credit for the
account of each Revolving Loan Borrower, all as contemplated therein;
WHEREAS, Borrower may from time to time be party to (or guaranty
the obligations of one or more of their Subsidiaries under) one or more (i)
interest rate agreements, interest rate cap agreements, interest rate collar
agreements or other similar agreements or arrangements, (ii) foreign exchange
contracts, currency swap agreements or other similar agreements or arrangements
designed to protect against the fluctuations in currency values and/or (iii)
other types of hedging agreements from time to time (each such agreement or
arrangement with an Other Creditor (as hereinafter defined), an "Interest Rate
Protection Agreement or Other Hedging Agreement"), with a Lender or an affiliate
of a Lender (each such Lender or affiliate, even if the respective Lender
subsequently ceases to be a Lender under the Credit Agreement for any reason,
together with such Lender's or affiliate's successors and assigns, collectively,
the "Other Creditors," and together with Lender Creditors, the "Secured
Creditors");
<PAGE> 306
EXHIBIT I
Page 2
WHEREAS, pursuant to the Parent Guaranty, the Parent Guarantor
has guaranteed to the Secured Creditors the payment when due of all obligations
and liabilities of each Guaranteed Party under or with respect to (x) the Credit
Documents and (y) each Interest Rate Protection Agreement or Other Hedging
Agreement with one or more Other Creditors;
WHEREAS, pursuant to the U.S. Subsidiaries Guaranty, each U.S.
Subsidiary Guarantor has jointly and severally guaranteed to the Secured
Creditors the payment when due of all the Guaranteed Obligations as described
therein;
WHEREAS, it is a condition precedent to the extensions of credit
under the Credit Agreement that each Pledgor shall have executed and delivered
to the Pledgee this Agreement; and
WHEREAS, each Pledgor will obtain benefits from the incurrence of
Loans and the issuance of Letters of Credit under the Credit Agreement and the
entering into of Interest Rate Protection Agreements or Other Hedging Agreements
and, accordingly, each Pledgor desires to execute this Agreement to satisfy the
conditions described in the preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to each
Pledgor, the receipt and sufficiency of which are hereby acknowledged, each
Pledgor hereby makes the following representations and warranties to the Pledgee
and hereby covenants and agrees with the Pledgee as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by each
Pledgor for the benefit of the Secured Creditors to secure:
(i) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and
liabilities (including, without limitation, indemnities, Fees and
interest thereon) of such Pledgor, now existing or hereafter incurred
under, arising out of or in connection with any Credit Document to which
it is a party (including, without limitation, all such obligations and
liabilities under the Guaranty to which such Pledgor is a party) and the
due performance and compliance by such Pledgor with the terms of each
such Credit Document (all such obligations and liabilities under this
clause (i), except to the extent consisting of Other Obligations (as
defined below), being herein collectively called the "Credit Document
Obligations");
<PAGE> 307
EXHIBIT I
Page 3
(ii) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and
liabilities of such Pledgor, now existing or hereafter incurred under,
arising out of or in connection with any Interest Rate Protection
Agreement or Other Hedging Agreement (including, without limitation, all
such obligations and liabilities under the Guaranty to which such
Pledgor is a party) and the due performance and compliance by such
Pledgor with the terms of each such Interest Rate Protection Agreement
or Other Hedging Agreement (all such obligations and liabilities under
this clause (ii) being herein collectively called the "Other
Obligations");
(iii) any and all sums advanced by the Pledgee in order to
preserve the Collateral (as hereinafter defined) or preserve its
security interest in the Collateral (as hereinafter defined);
(iv) in the event of any proceeding for the collection or
enforcement of any indebtedness, obligations, or liabilities referred to
in clauses (i), (ii) and (iii) above, after an Event of Default (such
term, as used in this Agreement, shall mean any Event of Default under,
and as defined in, the Credit Agreement, or any payment default by any
Borrower under any Interest Rate Protection Agreement or Other Hedging
Agreement and shall in any event include, without limitation, any
payment default (after the expiration of any applicable grace period) on
any of the Obligations (as hereinafter defined)) shall have occurred and
be continuing, the reasonable expenses of retaking, holding, preparing
for sale or lease, selling or otherwise disposing or realizing on the
Collateral, or of any exercise by the Pledgee of its rights hereunder,
together with reasonable attorneys' fees and court costs; and
(v) all amounts paid by any Secured Creditor as to which such
Secured Creditor has the right to reimbursement under Section 12 of this
Agreement;
all such obligations, liabilities, sums and expenses set forth in clauses (i)
through (v) of this Section 1 being herein collectively called the
"Obligations," it being acknowledged and agreed that the "Obligations" shall
include extensions of credit of the type described above, whether outstanding on
the date of this Agreement or extended from time to time after the date of this
Agreement.
2. DEFINITION OF STOCK, NOTES, LIMITED LIABILITY COMPANY
INTERESTS, PARTNERSHIP INTERESTS, SECURITIES, ETC. As used herein: (i) the term
"Stock" shall mean (x) with respect to corporations incorporated under the laws
of the United States or any State or territory thereof (each a "Domestic
Corporation"), all of the issued and outstanding shares of capital stock at any
time owned by any Pledgor of any Domestic Corporation and (y) with respect to
corporations that are not Domestic
<PAGE> 308
EXHIBIT I
Page 4
Corporations (each a "Foreign Corporation"), all of the issued and outstanding
shares of capital stock at any time owned by any Pledgor of any Foreign
Corporation, provided that, (A) except as provided in the last sentence of this
Section 2, to the extent capital stock entitled to vote for directors of any
Exempted Foreign Corporation (herein called "Voting Stock") is pledged hereunder
which represents more than 65% of the total combined voting power of all classes
of Voting Stock of the respective any Exempted Foreign Corporation (with all
Voting Stock of the respective Foreign Corporation in excess of said 65% limit
being herein called "Excess Foreign Corporation Voting Stock"), such Excess
Foreign Corporation Voting Stock shall secure Obligations of the respective
Pledgor only as a guarantor of Obligations of the German Borrowers, and shall
not secure any direct obligations of Alliance Gaming Corporation as a Borrower
(or guarantees of such Obligations by the respective Pledgor) and (B) the
Pledgor shall be required to pledge hereunder 100% of the issued and outstanding
shares of all capital stock which is not Voting Stock (herein called "Non-Voting
Stock") at any time owned by the Pledgor of any Foreign Corporation, which
Non-Voting Stock shall not be subject to the limitations described in preceding
clause (A); (ii) the term "Notes" shall mean all promissory notes from time to
time issued to, or held by, each Pledgor; (iii) the term "Limited Liability
Company Interest" shall mean the entire limited liability company interest at
any time owned by each Pledgor in any limited liability company; (iv) the term
"Partnership Interest" shall mean the entire partnership interests (whether
general and/or limited partnership interests) at any time owned by each Pledgor
in any Person (it being understood that the entire limited partnership interest
of Alliance Automaten GmbH & Co. KG shall be pledged by Alliance Holding Company
pursuant to this clause (iv)); (v) the term "Securities" shall mean all of the
Stock, Notes, Limited Liability Company Interests and Partnership Interests; and
(vi) the term "Exempted Foreign Corporation" shall mean any Foreign Corporation
that is treated as a corporation or an association taxable as a corporation for
U.S. Federal income tax purposes. Each Pledgor represents and warrants that on
the date hereof (i) the Stock held by such Pledgor consists of the number and
type of shares of the stock of the corporations as described in Annex A hereto;
(ii) such Stock constitutes that percentage of the issued and outstanding
capital stock of the issuing corporation as is set forth in Annex A hereto;
(iii) the Notes held by such Pledgor consist of the promissory notes described
in Annex B hereto; (iv) the Limited Liability Interests held by such Pledgor
consists of the number and type of interest of the Persons as described in Annex
C hereto; (v) such Limited Liability Company Interests constitute that
percentage of the issued and outstanding equity interests of the issuing Person
as set forth in Annex C thereto; (vi) the Partnership Interests held by such
Pledgor constitutes that percentage of the entire Partnership Interest of the
respective Pledged Partnership as is set forth in Annex D hereto for such
Pledgor; and (vii) on the date hereof, such Pledgor owns no other Securities. In
the circumstances and to the extent provided in Section 8.12 of the Credit
Agreement, the limitation set forth in part (A) of the proviso to clause (i)(y)
of this Section 2 and in Section 3.2 hereof shall
<PAGE> 309
EXHIBIT I
Page 5
no longer be applicable and such Pledgor shall duly pledge and deliver to the
Pledgee such of the Securities not theretofore required to be pledged hereunder.
3. PLEDGE OF SECURITIES, ETC.
3.1. Pledge. (a) To secure all Obligations (subject to part (A)
of the proviso to clause (i)(y) of Section 2(a) of the case of Voting Stock of
Foreign Corporations pledged hereunder) of such Pledgor and for the purposes set
forth in Section 1 hereof, each Pledgor hereby: (i) grants to the Pledgee a
security interest in all of the Collateral (as defined in Section 3.4 hereof)
owned by such Pledgor; (ii) pledges and deposits as security with the Pledgee
the Securities owned by such Pledgor on the date hereof, and delivers to the
Pledgee certificates or instruments therefor, duly endorsed in blank in the case
of Notes and accompanied by undated stock powers duly executed in blank by such
Pledgor in the case of Stock, or such other instruments of transfer as are
reasonably acceptable to the Pledgee; (iii) assigns, transfers, hypothecates,
mortgages, charges and sets over to the Pledgee all of such Pledgor's right,
title and interest in and to such Securities (and in and to all certificates or
instruments evidencing such Securities), to be held by the Pledgee, upon the
terms and conditions set forth in this Agreement; and (iv) transfers and assigns
to the Pledgee all of such Pledgor's Limited Liability Company Interests and all
of such Pledgor's right, title and interest in each limited liability company to
which such interests relate, whether now existing or hereafter acquired,
including, without limitation:
(A) all the capital thereof and its interest in all profits,
losses, Limited Liability Company Assets (as defined below) and other
distributions to which such Pledgor shall at any time be entitled in
respect of such Limited Liability Company Interests;
(B) all other payments due or to become due to such Pledgor in
respect of Limited Liability Company Interests, whether under any
limited liability company agreement or otherwise, whether as contractual
obligations, damages, insurance proceeds or otherwise;
(C) all of its claims, rights, powers, privileges, authority,
options, security interest, liens and remedies, if any, under any
limited liability company agreement or operating agreement, or at law or
otherwise in respect of such Limited Liability Company Interests;
(D) all present and future claims, if any, of any of such Pledgor
against any such limited liability company for moneys loaned or
advanced, for services rendered or otherwise;
<PAGE> 310
EXHIBIT I
Page 6
(E) all of such Pledgor's rights under any limited liability
company agreement or operating agreement or at law to exercise and
enforce every right, power, remedy, authority, option and privilege of
any of such Pledgor relating to such Limited Liability Company
Interests, including any power to terminate, cancel or modify any
limited liability company agreement or operating agreement, to execute
any instruments and to take any and all other action on behalf of and in
the name of any of such Pledgor in respect of such Limited Liability
Company Interest and any such limited liability company, to make
determinations, to exercise any election (including, but not limited to,
election of remedies) or option or to give or receive any notice,
consent, amendment, waiver or approval, together with full power and
authority to demand, receive, enforce, collect or receipt for any of the
foregoing or for any Limited Liability Company Asset, to enforce or
execute any checks, or other instruments or orders, to file any claims
and to take any action in connection with any of the foregoing;
(F) all other property hereafter delivered in substitution for or
in addition to any of the foregoing, all certificates and instruments
representing or evidencing such other property and all cash, securities,
interest, dividends, rights and other property at any time and from time
to time received, receivable or otherwise distributed in respect of or
in exchange for any or all thereof; and
(G) to the extent not otherwise included, all proceeds of any or
all of the foregoing;
and (vi) transfers and assigns to the Pledgee such Pledgor's Partnership
Interests (and delivers any certificates or instruments evidencing such
partnership interests, duly endorsed in blank) and all of such Pledgor's right,
title and interest in each Pledged Partnership including, without limitation:
(A) all of the capital thereof and its interest in all profits,
losses, Partnership Assets (as defined below) and other distributions to
which such Pledgor shall at any time be entitled in respect of any such
Collateral;
(B) all other payments due or to become due to such Pledgor in
respect of any such Collateral, whether under any partnership agreement
or otherwise, whether as contractual obligations, damages, insurance
proceeds or otherwise;
(C) all of its claims, rights, powers, privileges, authority,
options, security interest, liens and remedies, if any, under any
partnership or other agreement or at law or otherwise in respect of any
such Collateral;
<PAGE> 311
EXHIBIT I
Page 7
(D) all present and future claims, if any, of such Pledgor
against any Pledged Partnership for moneys loaned or advanced, for
services rendered or otherwise;
(E) all of such Pledgor's rights under any partnership agreement
or at law to exercise and enforce every right, power, remedy, authority,
option and privilege of such Pledgor relating to any Partnership
Interest, including any power, if any, to terminate, cancel or modify
any general or limited partnership agreement, to execute any instruments
and to take any and all other action on behalf of and in the name of
such Pledgor in respect of such Partnership Interest and any Pledged
Partnership, to make determinations, to exercise any election
(including, but not limited to, election of remedies) or option or to
give or receive any notice, consent, amendment, waiver or approval,
together with full power and authority to demand, receive, enforce,
collect, or receipt for any of the foregoing or for any Partnership
Asset, to enforce or execute any checks, or other instruments or orders,
to file any claims and to take any action in connection with any of the
foregoing;
(F) all other property hereafter delivered in substitution for or
in addition to any of the foregoing, all certificates and instruments
representing or evidencing such other property and all cash, securities,
interest, dividends, rights and other property at any time and from time
to time received, receivable or otherwise distributed in respect of or
in exchange for any or all thereof; and
(G) to the extent not otherwise included, all proceeds of any or
all of the foregoing.
(b) As used herein, the term "Limited Liability Company Assets"
shall mean all assets, whether tangible or intangible and whether real, personal
or mixed (including, without limitation, all limited liability company capital
and interests in other limited liability companies), at any time owned or
represented by any Limited Liability Company Interest.
(c) As used herein, the term "Partnership Assets" shall mean all
assets, whether tangible or intangible and whether real, personal or mixed
(including, without limitation, all partnership capital and interests in other
partnerships), at any time owned by any Pledged Partnership or represented by
any Partnership Interest.
3.2. Subsequently Acquired Securities. If any Pledgor shall
acquire (by purchase, stock dividend or otherwise) any additional Securities at
any time or from time to time after the date hereof, such Pledgor will forthwith
pledge and deposit such Securities (or certificates or instruments representing
such Securities) as security with the Pledgee and
<PAGE> 312
EXHIBIT I
Page 8
deliver to the Pledgee certificates therefor or instruments thereof, duly
endorsed in blank in the case of Notes and accompanied by undated stock powers
duly executed in blank in the case of Stock, Limited Liability Company Interests
or Partnership Interests or such other instruments of transfer as are reasonably
acceptable to the Pledgee, and will promptly thereafter deliver to the Pledgee a
certificate executed by any Authorized Officer of such Pledgor describing such
Securities and certifying that the same have been duly pledged with the Pledgee
hereunder. Subject to the last sentence of Section 2 hereof, any pledge of
Voting Stock of any Foreign Corporation shall be subject to the provisions of
part (A) of the proviso to clause (i)(y) of Section 2 hereof.
3.3. Uncertificated Securities. If any Securities (whether now
owned or hereafter acquired) are uncertificated securities, the respective
Pledgor shall promptly notify the Pledgee thereof, and shall promptly take all
actions required to perfect the security interest of the Pledgee under
applicable law (including, in any event, under Sections 8-313 and 8-321 of the
New York UCC, if applicable). Each Pledgor further agrees to take such actions
as the Pledgee deems reasonably necessary or desirable to effect the foregoing
and to permit the Pledgee to exercise any of its rights and remedies hereunder,
and agrees to provide an opinion of counsel reasonably satisfactory to the
Pledgee with respect to any such pledge of uncertificated Securities promptly
upon request of the Pledgee.
3.4. Definition of Pledged Stock, Pledged Notes, Pledged Limited
Liability Company Interests, Pledged Partnership Interests, Pledged Securities
and Collateral. All Stock at any time pledged or required to be pledged
hereunder is hereinafter called the "Pledged Stock," all Notes at any time
pledged or required to be pledged hereunder are hereinafter called the "Pledged
Notes," all Limited Liability Company Interests at any time pledged or required
to be pledged hereunder are hereinafter called the "Pledged Limited Liability
Company Interests," all Partnership Interests at any time pledged or required to
be pledged hereunder are hereinafter called the "Pledged Partnership Interests,"
all of the Pledged Stock, Pledged Notes, Pledged Limited Liability Interest and
Pledged Partnership Interest together are hereinafter called the "Pledged
Securities," which together with all proceeds thereof, including any securities
and moneys received and at the time held by the Pledgee hereunder are
hereinafter called the "Collateral".
4. CERTAIN OVERRIDE PROVISIONS.
4.1. Existing Senior Secured Notes; Delivery of Security
Requirements. Notwithstanding anything to the contrary contained in this
Agreement, to the extent at any time while this Agreement is in effect any
Existing Senior Secured Notes remain outstanding, and to the extent that any
Securities or other Collateral is pledged to secure the Existing Senior
<PAGE> 313
EXHIBIT I
Page 9
Secured Notes in accordance with the terms of the Existing Senior Secured Notes
Documents, then the pledge of such Collateral pursuant to this Agreement shall
be subject to the prior security interests created pursuant to the Existing
Senior Secured Notes Collateral Documents in such Collateral (although the
existence of such prior security interests shall in no way limit or preclude the
Pledgee or Secured Creditors from taking enforcement actions with respect to the
Collateral). Furthermore, at any time when any Existing Senior Secured Notes
remain outstanding, to the extent that any Collateral has been physically
delivered to the trustee pursuant to the Existing Senior Secured Notes Indenture
(the "Trustee") or any other agent, sub-agent, collateral agent, custodian or
bailee for the benefit of the holders of the Existing Senior Secured Notes or as
directed by the Trustee (with each such person or entity, together with the
Trustee, being herein called a "Bailee"), then (and for so long as such
Collateral is so held), such Collateral shall not be required to be delivered to
the Pledgee pursuant to this Agreement, in each case (subject to the provisions
of Section 13.23(c) of the Credit Agreement) so long as the respective such
Bailee is a party to a Bailee Agreement, in the form required by the Credit
Agreement.
4.2. Pledged Securities Requisite Gaming Approvals; Etc.
Notwithstanding anything to the contrary contained above or elsewhere in this
Agreement, unless and until the Pledged Securities Requisite Gaming Approvals
are obtained, the Notes, stock or other equity interests of the entities listed
in Section 13.18(c) of the Credit Agreement shall not be pledged hereunder.
Furthermore, equity interests shall not be pledged hereunder to the extent the
pledge is not permitted as contemplated by Section 13(b) of the Credit
Agreement, and items which would otherwise constitute Collateral hereunder shall
not be pledged to the extent specifically provided in Sections 13.26 and 13.27
of the Credit Agreement. As and when, and to the extent, pledges of assets
described above are permitted in accordance with Applicable Gaming Regulations
and the provisions of Sections 13.18 and 13.26, as applicable, of the Credit
Agreement, all such assets which would otherwise constitute Collateral hereunder
shall be pledged, and delivered for pledge, hereunder.
5. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. (a) The Pledgee
shall have the right to appoint one or more sub-agents for the purpose of
retaining physical possession of the Pledged Securities, which may be held (in
the discretion of the Pledgee) in the name of such Pledgor, endorsed or assigned
in blank or in favor of the Pledgee or any nominee or nominees of the Pledgee or
a sub-agent appointed by the Pledgee. The Pledgee agrees to promptly notify the
relevant Pledgor after the appointment of any sub-agent; provided, however, that
the failure to give such notice shall not affect the validity of such
appointment.
(b) In the case of any Pledgor's grant to the Pledgee of Securities of
any corporation, partnership or limited liability company incorporated or
organized in the state
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of Nevada, such Securities shall be held by a sub-agent of the Pledgee residing
in the state of Nevada.
6. VOTING, ETC., WHILE NO SPECIFIED DEFAULT. Unless and until a
Default under Section 10.01 or 10.05 of the Credit Agreement, any other payment
default in respect of the Obligations, or any Event of Default under the Credit
Agreement (with each such Default or Event of Default being herein called a
"Specified Default") shall have occurred and be continuing, each Pledgor shall
be entitled to exercise any and all voting and other consensual rights
pertaining to the Pledged Securities and to give all consents, waivers or
ratifications in respect thereof; provided, that no vote shall be cast or any
consent, waiver or ratification given or any action taken which would violate or
be inconsistent with any of the terms of this Agreement, any other Credit
Document or any Interest Rate Protection Agreement or Other Hedging Agreement
(collectively, the "Secured Debt Agreements"), or which would have the effect of
impairing the rights, priorities or remedies of the Pledgee or any other Secured
Creditor under this Agreement or any other Secured Debt Agreement. All such
rights of such Pledgor to vote and to give consents, waivers and ratifications
shall cease in case a Specified Default shall occur and be continuing, and
Section 8 hereof shall become applicable.
7. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless a specified Default
shall have occurred and be continuing, all cash dividends payable in respect of
the Pledged Stock, Pledged Limited Liability Company Interests and Pledged
Partnership Interests and all payments in respect of the Pledged Notes shall be
paid to the respective Pledgor. The Pledgee shall also be entitled to receive
directly, and to retain as part of the Collateral:
(i) all other or additional stock or other securities or property
(other than cash) paid or distributed by way of dividend or otherwise in
respect of the Pledged Stock, Pledged Limited Liability Company
Interests and Pledged Partnership
Interests;
(ii) all other or additional stock or other securities or property
(including cash) paid or distributed in respect of the Pledged Stock,
Pledged Limited Liability Company Interests or Pledged Partnership
Interests by way of stock-split, spin-off, split-up, reclassification,
combination of shares or similar rearrangement; and
(iii) all other or additional stock or other securities or property
(including cash) which may be paid in respect of the Collateral by
reason of any consolidation, merger, exchange of stock, conveyance of
assets, liquidation or similar corporate reorganization.
<PAGE> 315
EXHIBIT I
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Nothing contained in this Section 7 shall limit or restrict in any way the
Pledgee's right to receive proceeds of the Collateral in any form in accordance
with Section 3 of this Agreement. All dividends, distributions or other payments
which are received by the Pledgor contrary to the provisions of this Section 7
and Section 8 below shall be received in trust for the benefit of the Pledgee,
shall be segregated from other property or funds of the Pledgor and shall be
forthwith paid over to the Pledgee as Collateral in the same form as so received
(with any necessary endorsement).
8. REMEDIES IN CASE OF SPECIFIED DEFAULTS. In case a Specified
Default shall have occurred and be continuing, the Pledgee shall be entitled to
exercise all of the rights, powers and remedies (whether vested in it by this
Agreement or by any other Secured Debt Agreement or by law) for the protection
and enforcement of its rights in respect of the Collateral, and the Pledgee
shall, subject to compliance with the Applicable Gaming Regulations, be entitled
to exercise all the rights and remedies of a secured party under the Uniform
Commercial Code and also shall, subject to compliance with the Applicable Gaming
Regulations, be entitled, without limitation, to exercise the following rights,
which each Pledgor hereby agrees to be commercially reasonable:
(i) to receive all amounts payable in respect of the Collateral
payable to such Pledgor under Section 7 hereof;
(ii) to transfer all or any part of the Pledged Securities into
the Pledgee's name or the name of its nominee or nominees (the Pledgee
agrees to promptly notify the relevant Pledgor after such transfer;
provided, however, that the failure to give such notice shall not affect
the validity of such transfer);
(iii) to accelerate any Pledged Note which may be accelerated in
accordance with its terms, and take any other action to collect upon any
Pledged Note (including, without limitation, to make any demand for
payment thereon);
(iv) to vote all or any part of the Pledged Stock, Pledged Limited
Liability Company Interests or Pledged Partnership Interests (whether or
not transferred into the name of the Pledgee) and give all consents,
waivers and ratifications in respect of the Collateral and otherwise act
with respect thereto as though it were the outright owner thereof (each
Pledgor hereby irrevocably constituting and appointing the Pledgee the
proxy and attorney-in-fact of such Pledgor, with full power of
substitution to do so); and
(v) at any time or from time to time to sell, assign and deliver,
or grant options to purchase, all or any part of the Collateral, or any
interest therein, at any public or private sale, without demand of
performance, advertisement or notice of
<PAGE> 316
EXHIBIT I
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intention to sell or of the time or place of sale or adjournment thereof
or to redeem or otherwise (all of which are hereby waived by each
Pledgor), for cash, on credit or for other property, for immediate or
future delivery without any assumption of credit risk, and for such
price or prices and on such terms as the Pledgee in its absolute
discretion may determine; provided, that at least 10 Business Days'
notice of the time and place of any such sale shall be given to such
Pledgor. Each Pledgor hereby waives and releases to the fullest extent
permitted by law any right or equity of redemption with respect to the
Collateral, whether before or after sale hereunder, and all rights, if
any, of marshalling the Collateral and any other security for the
Obligations or otherwise. At any such sale, unless prohibited by
applicable law, the Pledgee on behalf of the Secured Creditors may bid
for and purchase all or any part of the Collateral so sold free from any
such right or equity of redemption. Neither the Pledgee nor any Secured
Creditor shall be liable for failure to collect or realize upon any or
all of the Collateral or for any delay in so doing nor shall any of them
be under any obligation to take any action whatsoever with regard
thereto.
9. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of
the Pledgee provided for in this Agreement or any other Secured Debt Agreement
or now or hereafter existing at law or in equity or by statute shall be
cumulative and concurrent and shall be in addition to every other such right,
power or remedy. The exercise or beginning of the exercise by the Pledgee or any
other Secured Creditor of any one or more of the rights, powers or remedies
provided for in this Agreement or any other Secured Debt Agreement or now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by the Pledgee or any other Secured
Creditor of all such other rights, powers or remedies, and no failure or delay
on the part of the Pledgee or any other Secured Creditor to exercise any such
right, power or remedy shall operate as a waiver thereof. The Secured Creditors
agree that this Agreement may be enforced only by the action of the
Administrative Agent or the Pledgee, in each case acting upon the instructions
of the Required Lenders (or, after the date on which all Credit Document
Obligations have been paid in full, the holders of at least a majority of the
outstanding Other Obligations) and that no other Secured Creditor shall have any
right individually to seek to enforce or to enforce this Agreement or to realize
upon the security to be granted hereby, it being understood and agreed that such
rights and remedies may be exercised by the Administrative Agent or the Pledgee
or the holders of at least a majority of the outstanding Other Obligations, as
the case may be, for the benefit of the Secured Creditors upon the terms of this
Agreement.
10. APPLICATION OF PROCEEDS. (a) All moneys collected by the
Pledgee upon any sale or other disposition of the Collateral pursuant to the
terms of this
<PAGE> 317
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Agreement, together with all other moneys received by the Pledgee hereunder,
shall be applied in the manner provided in the U.S. Security Agreement.
(b) It is understood and agreed that the Pledgors shall remain
jointly and severally liable to the extent of any deficiency between the amount
of the proceeds of the Collateral hereunder and the aggregate amount of the
Obligations.
11. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by
the Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of the Pledgee or 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 Pledgee or such officer or be answerable in any way for the
misapplication or nonapplication thereof.
12. INDEMNITY. Each Pledgor jointly and severally agrees (i) to
indemnify and hold harmless the Pledgee in such capacity and each other Secured
Creditor from and against any and all claims, demands, losses, judgments and
liabilities of whatsoever kind or nature, and (ii) to reimburse the Pledgee and
each other Secured Creditor for all reasonable costs and expenses, including
reasonable attorneys' fees, in each case to the extent growing out of or
resulting from the exercise by the Pledgee of any right or remedy granted to it
hereunder or under any other Secured Debt Agreement except, with respect to
clauses (i) and (ii) above, for those arising from the Pledgee's or such other
Secured Creditor's gross negligence or willful misconduct. In no event shall the
Pledgee be liable, in the absence of gross negligence or willful misconduct on
its part, for any matter or thing in connection with this Agreement other than
to account for moneys actually received by it in accordance with the terms
hereof. If and to the extent that the obligations of the Pledgors under this
Section 12 are unenforceable for any reason, each Pledgor hereby agrees to make
the maximum contribution to the payment and satisfaction of such obligations
which is permissible under applicable law.
13. FURTHER ASSURANCES. (a) Each Pledgor agrees that it will join
with the Pledgee in executing and, at such Pledgor's own expense, file and
refile under the applicable UCC or such other law such financing statements,
continuation statements and other documents in such offices as the Pledgee may
reasonably deem necessary or appropriate and wherever required or permitted by
law in order to perfect and preserve the Pledgee's security interest in the
Collateral and hereby authorizes the Pledgee to file financing statements and
amendments thereto relative to all or any part of the Collateral without the
signature of such Pledgor where permitted by law, and agrees to do such further
acts and things and to execute and deliver to the Pledgee such additional
conveyances, assignments, agreements and instruments as the Pledgee may
reasonably deem
<PAGE> 318
EXHIBIT I
Page 14
necessary or advisable to carry into effect the purposes of this Agreement or to
further assure and confirm unto the Pledgee its rights, powers and remedies
hereunder.
(b) Each Pledgor agrees to assist the Pledgee in obtaining all
approvals of any Gaming Authority or other governmental authority that are
required by law in connection with any action or transaction contemplated by
this Agreement, including, without limitation, the Pledged Stock Requisite
Gaming Approvals, and, at the Pledgee's request after and during the continuance
of an Event of Default, to prepare, sign and file with the appropriate Gaming
Authority the respective Pledgor's portion of any application or applications
for consent to the transfer of the equity interest of such Pledgor necessary or
appropriate under the Applicable Gaming Regulations for approval by the
respective Gaming Authority of any sale or transfer of such equity interest,
pursuant to the exercise of any Secured Creditor's remedies hereunder and under
the Documents.
14. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance
with this Agreement all items of the Collateral at any time received under this
Agreement. It is expressly understood and agreed that the obligations of the
Pledgee as holder of the Collateral and interests therein and with respect to
the disposition thereof, and otherwise under this Agreement, are only those
expressly set forth in this Agreement. The Pledgee shall act hereunder on the
terms and conditions set forth herein and in Section 12 of the Credit Agreement.
15. TRANSFER BY PLEDGORS. No Pledgor will sell or otherwise
dispose of, grant any option with respect to, or mortgage, pledge or otherwise
encumber any of the Collateral or any interest therein (except in accordance
with the terms of this Agreement and as permitted by the terms of the Credit
Agreement).
16. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
PLEDGOR. Each Pledgor represents, warrants and covenants that (i) it is the
legal, record and beneficial owner of, and has good title to, all Pledged
Securities, subject to no pledge, lien, mortgage, hypothecation, security
interest, charge, option or other encumbrance whatsoever, except the liens and
security interests created by this Agreement and liens permitted under Section
9.01 of the Credit Agreement (including those referenced in Section 4.10
hereof); (ii) it has requisite power, authority and legal right to pledge all
the Pledged Securities; (iii) this Agreement has been duly authorized, executed
and delivered by such Pledgor and constitutes a legal, valid and binding
obligation of such Pledgor enforceable in accordance with its terms, except to
the extent that the enforceability hereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by equitable principles (regardless of
whether enforcement is sought in equity or at law); (iv) no consent of any other
party (including, without limitation, any stockholder or creditor of such
Pledgor or any of its Subsidiaries)
<PAGE> 319
EXHIBIT I
Page 15
and, except for any approval of the Gaming Authorities that may be required as
contemplated by Section 13.18(b) of the Credit Agreement or in connection with
the exercise of any remedies hereunder, no consent, license, permit, approval or
authorization of, exemption by, notice or report to, or registration, filing
(except any filings required under the Uniform Commercial Code, which filings
have been made) or declaration with, any governmental authority is required to
be obtained by such Pledgor in connection with the execution, delivery or
performance of this Agreement, or in connection with the exercise of its rights
and remedies pursuant to this Agreement, except those which have been obtained
or made or as may be required by laws affecting the offer and sale of securities
generally in connection with the exercise by the Pledgee of certain of its
remedies hereunder; (v) the execution, delivery and performance of this
Agreement by such Pledgor does not violate any provision of any applicable law
or regulation or of any order, judgment, writ, award or decree of any court,
arbitrator or governmental authority, domestic or foreign, or of the certificate
of incorporation or by-laws (or analogous organizational documents) of such
Pledgor or of any securities issued by such Pledgor or any of its Subsidiaries,
or of any mortgage, indenture, lease, deed of trust, credit agreement or loan
agreement, or any other material agreement, contract or instrument to which such
Pledgor or any of its Subsidiaries is a party or which purports to be binding
upon such Pledgor or any of its Subsidiaries or upon any of their respective
assets and will not result in the creation or imposition of any lien or
encumbrance on any of the assets of such Pledgor or any of its Subsidiaries
except as contemplated by this Agreement; (vi) all the shares of Stock and all
Pledged Limited Liability Company Interests have been duly and validly issued,
are fully paid and nonassessable and subject to no options to purchase or
similar rights; (vii) to the best knowledge of the respective Pledgor, each of
the Pledged Notes, when executed by the obligor thereof, will be the legal,
valid and binding obligation of such obligor, enforceable in accordance with its
terms, except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by equitable principles
(regardless of whether enforcement is sought in equity or at law); and (viii)
subject to Section 4.2 hereof, the pledge, assignment and delivery to the
Pledgee of the Pledged Securities creates a valid and perfected first security
interest in such Securities, subject to no prior lien or encumbrance or to any
agreement purporting to grant to any third party a lien or encumbrance on the
property or assets of such Pledgor which would include the Securities. Each
Pledgor covenants and agrees that it will defend the Pledgee's right, title and
security interest in and to the Securities and the proceeds thereof against the
claims and demands of all persons whomsoever; and such Pledgor covenants and
agrees that it will have like title to and right to pledge any other property at
any time hereafter pledged to the Pledgee as Collateral hereunder and will
likewise defend the right thereto and security interest therein of the Pledgee
and the other Secured Creditors.
<PAGE> 320
EXHIBIT I
Page 16
17. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of each
Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including, without limitation: (i) any renewal,
extension, amendment or modification of or addition or supplement to or deletion
from any Secured Debt Agreement or any other instrument or agreement referred to
therein, or any assignment or transfer of any thereof; (ii) any waiver, consent,
extension, indulgence or other action or inaction under or in respect of any
such agreement or instrument or this Agreement; (iii) any furnishing of any
additional security to the Pledgee or its assignee or any acceptance thereof or
any release of any security by the Pledgee or its assignee; (iv) any limitation
on any party's liability or obligations under any such instrument or agreement
or any invalidity or unenforceability, in whole or in part, of any such
instrument or agreement or any term thereof; or (v) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation or other like
proceeding relating to such Pledgor or any Subsidiary of such Pledgor, or any
action taken with respect to this Agreement by any trustee or receiver, or by
any court, in any such proceeding, whether or not such Pledgor shall have notice
or knowledge of any of the foregoing.
18. REGISTRATION, ETC. (a) If an Event of Default shall have
occurred and be continuing and any Pledgor shall have received from the Pledgee
a written request or requests that such Pledgor cause any registration,
qualification or compliance under any Federal or state securities law or laws to
be effected with respect to all or any part of the Pledged Stock or Pledged
Limited Liability Company Interests, such Pledgor as soon as practicable and at
its expense will, subject to compliance with the Applicable Gaming Regulations,
use its reasonable efforts to cause such registration to be effected (and be
kept effective) and will use its reasonable efforts to cause such qualification
and compliance to be effected (and be kept effective) as may be so requested and
as would permit or facilitate the sale and distribution of such Pledged Stock or
Pledged Limited Liability Company Interests, including, without limitation,
registration under the Securities Act of 1933 as then in effect (or any similar
statute then in effect), appropriate qualifications under applicable blue sky or
other state securities laws and appropriate compliance with any other government
requirements; provided, that the Pledgee shall furnish to such Pledgor such
information regarding the Pledgee as such Pledgor may request in writing and as
shall be required in connection with any such registration, qualification or
compliance. Such Pledgor will cause the Pledgee to be kept reasonably advised in
writing as to the progress of each such registration, qualification or
compliance and as to the completion thereof, will furnish to the Pledgee such
number of prospectuses, offering circulars or other documents incident thereto
as the Pledgee from time to time may reasonably request, and will indemnify the
Pledgee, each other Secured Creditor and all others participating in the
distribution of the Pledged Stock or Pledged Limited Liability Company Interests
against
<PAGE> 321
EXHIBIT I
Page 17
all claims, losses, damages and liabilities caused by any untrue statement (or
alleged untrue statement) of a material fact contained therein (or in any
related registration statement, notification or the like) or by any omission (or
alleged omission) to state therein (or in any related registration statement,
notification or the like) a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same may have been caused by an untrue statement or omission based upon
information furnished in writing to such Pledgor by the Pledgee or such other
Secured Creditor expressly for use therein.
(b) If at any time when the Pledgee shall determine to exercise
its right to sell all or any part of the Pledged Securities pursuant to Section
7 hereof, such Pledged Securities or the part thereof to be sold shall not, for
any reason whatsoever, be effectively registered under the Securities Act of
1933, as then in effect, the Pledgee may, in its sole and absolute discretion,
other than as restricted by Applicable Gaming Regulations, sell such Pledged
Securities or part thereof by private sale in such manner and under such
circumstances as the Pledgee may deem necessary or advisable in order that such
sale may legally be effected without such registration; provided, that at least
10 Business Days' notice of the time and place of any such sale shall be given
to such Pledgor. Without limiting the generality of the foregoing, in any such
event the Pledgee, in its sole and absolute discretion, other than as restricted
by Applicable Gaming Regulations: (i) may proceed to make such private sale
notwithstanding that a registration statement for the purpose of registering
such Pledged Securities or part thereof shall have been filed under such
Securities Act; (ii) may approach and negotiate with a single possible purchaser
to effect such sale; and (iii) may restrict such sale to a purchaser who will
represent and agree that such purchaser is purchasing for its own account, for
investment, and not with a view to the distribution or sale of such Pledged
Securities or part thereof. In the event of any such sale, the Pledgee shall
incur no responsibility or liability for selling all or any part of the Pledged
Securities at a price which the Pledgee, in its sole and absolute discretion,
may in good faith deem reasonable under the circumstances, notwithstanding the
possibility that a substantially higher price might be realized if the sale were
deferred until after registration as aforesaid.
19. TERMINATION, RELEASE. (a) After the Termination Date (as
defined below), this Agreement shall terminate (provided that all indemnities
set forth herein including, without limitation, in Section 12 hereof shall
survive any such termination) and the Pledgee, at the request and expense of the
respective Pledgor, will promptly execute and deliver to such Pledgor a proper
instrument or instruments acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to such Pledgor (without
recourse and without any representation or warranty) such of the Collateral as
may be in the possession of the Pledgee and as has not theretofore been sold or
otherwise applied or released pursuant to this Agreement. As used
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EXHIBIT I
Page 18
in this Agreement, "Termination Date" shall mean the date upon which the Total
Commitments and all Interest Rate Protection Agreements or Other Hedging
Agreements have been terminated, no Note (as defined in the Credit Agreement) or
Letter of Credit is outstanding and all other Obligations then due and payable
have been indefeasibly paid in full.
(b) In the event that any part of the Collateral is sold (but not
to the U.S. Borrower or a Subsidiary thereof) in connection with a sale
permitted by Section 9.02 of the Credit Agreement or is otherwise released at
the direction of the Required Lenders (or all the Lenders if required by Section
13.12 of the Credit Agreement), the Pledgee, at the request and expense of such
Pledgor will duly assign, transfer and deliver to such Pledgor (without recourse
and without any representation or warranty) such of the Collateral as is then
being (or has been) so sold or released and as may be in possession of the
Pledgee and has not theretofore been released pursuant to this Agreement.
(c) At any time that a Pledgor desires that Collateral be
released as provided in the foregoing Section 19(a) or (b), it shall deliver to
the Pledgee a certificate signed by an Authorized Officer of such Pledgor
stating that the release of the respective Collateral is permitted pursuant to
Section 19(a) or (b), and the Pledgee shall be entitled (but not required) to
conclusively rely thereof.
20. NOTICES, ETC. Except as otherwise specified herein, all
notices, requests, demands or other communications to or upon the respective
parties hereto shall be deemed to have been given or made when delivered to the
party to which such notice, request, demand or other communication is required
or permitted to be given or made under this Agreement, addressed as follows:
(a) if to any Pledgor, at:
6601 South Bermuda
Las Vegas, Nevada
Attention: Scott Schweinfurth
Telephone No.: (702) 899-7700
Facsimile No.: (702) 263-5636
(b) if to the Pledgee, at:
Credit Suisse First Boston
Eleven Madison Avenue
New York, New York 10010
Attention: Ed Barr
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EXHIBIT I
Page 19
Telephone No.: (212) 325-9151
Telecopier No.: (212) 325-8309
(c) if to any Lender (other than the Pledgee), at such address as
such Lender shall have specified in the Credit Agreement;
(d) if to any Other Creditor, at such address as such Other
Creditor shall have specified in writing to each Pledgor and the Pledgee; or at
such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
21. WAIVER; AMENDMENT. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by each Pledgor directly affected thereby (it
being understood that additional Pledgors may be added as parties hereto from
time to time in accordance with Section 23, and that no consent of any other
Pledgor or of the Required Lenders shall be required in connection therewith)
and the Pledgee (with the written consent of either (x) the Required Lenders (or
all the Lenders if required by Section 13.12 of the Credit Agreement) at all
times prior to the time on which all Credit Document Obligations have been paid
in full or (y) the holders of at least a majority of the outstanding Other
Obligations at all times after the time on which all Credit Document Obligations
have been paid in full; provided, that any change, waiver, modification or
variance affecting the rights and benefits of a single Class (as defined below)
of Secured Creditors (and not all Secured Creditors in a like or similar manner)
shall require the written consent of the Requisite Creditors (as defined below)
of such Class. For the purpose of this Agreement, the term "Class" shall mean
each class of Secured Creditors, i.e., whether (i) the Lender Creditors as
holders of the Credit Document Obligations or (ii) the Other Creditors as
holders of the Other Obligations. For the purpose of this Agreement, the term
"Requisite Creditors" of any Class shall mean each of (i) with respect to the
Credit Document Obligations, the Required Lenders and (ii) with respect to the
Other Obligations, the holders of at least a majority of all obligations
outstanding from time to time under the Interest Rate Protection Agreements or
Other Hedging Agreements.
22. RELEASE OF GUARANTORS. In the event any Pledgor which is a
Subsidiary of the U.S. Borrower party to the U.S. Subsidiaries Guaranty is
released from its Guaranty under the U.S. Subsidiaries Guaranty, such Pledgor
shall be released from this Agreement and this Agreement shall, as to such
Pledgor only, have no further force or effect.
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Page 20
23. MISCELLANEOUS. This Agreement shall be binding upon the
successors and assigns of each Pledgor and shall inure to the benefit of and be
enforceable by the Pledgee and its successors and assigns. THIS AGREEMENT SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS). The
headings in this Agreement are for purposes of reference only and shall not
limit or define the meaning hereof. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which shall
constitute one instrument.
24. ADDITIONAL PLEDGORS. It is understood and agreed that any
Domestic Subsidiary of the U.S. Borrower that is required to execute a
counterpart of this Agreement after the date hereof pursuant to the Credit
Agreement shall automatically become a Pledgor hereunder by executing a
counterpart hereof and delivering the same to the Pledgee.
25. RECOURSE. This Agreement is made with full recourse to the
Pledgors and pursuant to and upon all representations, warranties, covenants and
agreements on the part of the Pledgors contained herein and in the other Secured
Debt Agreements and otherwise in writing in connection herewith or therewith.
26. LIMITATION BY LAW; SEVERABILITY. All rights, remedies and
powers in this Agreement may be exercised only to the extent that the exercise
thereof does not violate any applicable provision of the Applicable Gaming
Regulations, and all the provisions of this Agreement are intended to be subject
to all applicable mandatory provisions of the Applicable Gaming Regulations
which may be controlling and to be limited to the extent necessary so that they
will not render this Agreement invalid or unenforceable, in whole or in part.
27. GAMING REGULATORY MATTERS. The Pledgee, on behalf of the
Secured Creditors, acknowledges and agrees that:
(a) In the event that a Secured Creditor exercises one or more of
the remedies set forth in this Agreement or any other Secured Debt Agreement
with respect to any Pledged Stock that is subject to the Pledged Stock Requisite
Gaming Approvals, such exercise of remedies would be deemed a separate transfer
of such Pledged Stock and would require the separate and prior approval of the
applicable Gaming Authority pursuant to Applicable Gaming Regulations.
(b) The approval by the applicable Gaming Authority of this
Agreement shall not be, and shall not be construed as, the approval, either
express or implied, for the
<PAGE> 325
EXHIBIT I
Page 21
Secured Creditors to take any actions or steps provided for in this Agreement
for which approval by the Gaming Authorities is required, without first
obtaining such prior and separate approval of such Gaming Authority, to the
extent required by the Applicable Gaming Regulations.
(c) The Pledgee and each sub-agent of the Pledgee shall comply
with the conditions, if any, imposed by any Gaming Authority in connection with
the approvals of the security interests granted hereunder by Pledgors,
including, without limitation, any conditions requiring the Pledgee or sub-agent
of the Pledgee to maintain the certificates representing certain Pledged
Securities at a location within the applicable jurisdiction designated to the
applicable Gaming Authority and to permit representatives of the Gaming
Authorities to inspect such Pledged Securities and certificates thereof. Neither
the Pledgee nor any sub-agent of the Pledgee shall surrender possession of any
Pledged Securities to any Person other than the respective Pledgor without the
prior approval of the applicable Gaming Authority or as otherwise permitted by
Applicable Gaming Regulations.
(d) In connection with the foregoing provisions of this Section
27, it is acknowledged and agreed that neither the Pledgee, nor any Secured
Creditor, shall have any liability to any Pledgee for any non-compliance or
failure to meet obligations as otherwise provided above in this Section 27,
except to the extent of the gross negligence or willful misconduct of the
Pledgee or the respective Secured Creditor. Furthermore, the Pledgee and Secured
Creditors shall be entitled to conclusively rely on the advise of counsel
selected by it or them in connection with the foregoing matters.
<PAGE> 326
IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused this
Agreement to be executed by their duly elected officers duly authorized as of
the date first above written.
ALLIANCE GAMING CORPORATION,
as a Pledgor
By /s/ Scott Schweinfurth
-----------------------------------
Title: Senior Vice President, CFO
and Treasurer
ALLIANCE HOLDING COMPANY,
as a Pledgor
By /s/ Scott Schweinfurth
-----------------------------------
Title: Treasurer
UNITED COIN MACHINE CO.,
as a Pledgor
By /s/ Scott Schweinfurth
-----------------------------------
Title: Treasurer
PLANTATION INVESTMENTS, INC.,
as a Pledgor
By /s/ Scott Schweinfurth
-----------------------------------
Title: Treasurer
APT GAMES, INC.,
as a Pledgor
By /s/ Scott Schweinfurth
-----------------------------------
Title: Treasurer
<PAGE> 327
FOREIGN GAMING VENTURES, INC.,
as a Pledgor
By /s/ Scott Schweinfurth
-----------------------------------
Title: Treasurer
LOUISIANA VENTURES, INC.,
as a Pledgor
By /s/ Scott Schweinfurth
-----------------------------------
Title: Treasurer
UNITED GAMING RAINBOW,
as a Pledgor
By /s/ Scott Schweinfurth
-----------------------------------
Title: Treasurer
NATIVE AMERICAN INVESTMENT,
INC., as a Pledgor
By /s/ Scott Schweinfurth
-----------------------------------
Title: Treasurer
BALLY GAMING INTERNATIONAL,
INC., as a Pledgor
By /s/ Scott Schweinfurth
-----------------------------------
Title: Treasurer
BALLY GAMING, INC., as a Pledgor
By /s/ Scott Schweinfurth
-----------------------------------
Title: Treasurer
<PAGE> 328
Accepted and Agreed to:
CREDIT SUISSE FIRST BOSTON,
as Pledgee
By /s/ Sean S. Bernard
------------------------------
Title: Assistant Vice President
By /s/ Edward E. Barr
-------------------------------
Title: Associate
<PAGE> 329
EXHIBIT J
<PAGE> 330
EXHIBIT J
[CONFORMED AS EXECUTED]
U.S. SECURITY AGREEMENT
among
ALLIANCE GAMING CORPORATION,
CERTAIN OF ITS SUBSIDIARIES
and
CREDIT SUISSE FIRST BOSTON,
as Collateral Agent
Dated as of August 8, 1997
<PAGE> 331
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I SECURITY INTERESTS......................................... 2
1.1. Grant of Security Interests.................................... 2
1.2. Power of Attorney.............................................. 3
ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND
COVENANTS.................................................. 3
2.1. Necessary Filings.............................................. 3
2.2. No Liens....................................................... 4
2.3. Other Financing Statements..................................... 4
2.4. Chief Executive Office; Records................................ 4
2.5. Location of Inventory and Equipment............................ 5
2.6. Recourse....................................................... 5
2.7. Trade Names; Change of Name.................................... 5
ARTICLE III SPECIAL PROVISIONS CONCERNING RECEIVABLES;
CONTRACT RIGHTS; INSTRUMENTS............................... 6
3.1. Additional Representations and Warranties...................... 6
3.2. Maintenance of Records......................................... 6
3.3. Direction to Account Debtors; Contracting Parties; etc......... 7
3.4. Modification of Terms; etc..................................... 7
3.5. Collection..................................................... 8
3.6. Instruments.................................................... 8
3.7. Assignors Remain Liable Under Receivables...................... 8
3.8. Assignors Remain Liable Under Contracts........................ 9
3.9. Further Actions................................................ 9
ARTICLE IV SPECIAL PROVISIONS CONCERNING TRADEMARKS................... 9
4.1. Additional Representations and Warranties...................... 9
4.2. Infringements.................................................. 10
4.3. Preservation of Marks.......................................... 10
4.4. Maintenance of Registration.................................... 10
4.5. Future Registered Marks........................................ 11
4.6. Remedies....................................................... 11
4.7. Override Provisions Relating to Bally Trademark License
Agreement...................................................... 11
ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS, COPYRIGHTS
AND TRADE SECRETS.......................................... 12
5.1. Additional Representations and Warranties...................... 12
</TABLE>
(i)
<PAGE> 332
<TABLE>
<CAPTION>
Page
----
<S> <C>
5.2. Infringements.................................................. 13
5.3. Maintenance of Patents......................................... 13
5.4. Prosecution of Patent Application.............................. 13
5.5. Other Patents and Copyrights................................... 13
5.6. Remedies....................................................... 14
ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL....................... 14
6.1. Protection of Collateral Agent's Security...................... 14
6.2. Further Actions................................................ 15
6.3. Financing Statements........................................... 15
6.4. Assistance with Gaming Approvals............................... 15
ARTICLE VII REMEDIES UPON OCCURRENCE OF SPECIFIED DEFAULT............. 16
7.1. Remedies; Obtaining the Collateral Upon Default................ 16
7.2. Remedies; Disposition of the Collateral........................ 17
7.3. Waiver of Claims............................................... 18
7.4. Application of Proceeds........................................ 19
7.5. Remedies Cumulative............................................ 22
7.6. Discontinuance of Proceedings.................................. 22
ARTICLE VIII INDEMNITY.................................................. 23
8.1. Indemnity...................................................... 23
8.2. Indemnity Obligations Secured by Collateral; Survival.......... 24
ARTICLE IX DEFINITIONS................................................ 24
ARTICLE X MISCELLANEOUS.............................................. 30
10.1. Notices....................................................... 30
10.2. Waiver; Amendment............................................. 31
10.3. Obligations Absolute.......................................... 32
10.4. Successors and Assigns........................................ 32
10.5. Headings Descriptive.......................................... 32
10.6. Governing Law................................................. 32
10.7. Assignor's Duties............................................. 32
10.8. Termination; Release.......................................... 32
10.9. Counterparts.................................................. 33
10.10. Limitation by Law; Severability............................... 33
10.11. The Collateral Agent.......................................... 34
10.12. Additional Assignors.......................................... 34
</TABLE>
ANNEX A Schedule of Chief Executive Offices/Record Locations
ANNEX B Schedule of Inventory and Equipment Locations
ANNEX C Schedule of Trade and Fictitious Names
(ii)
<PAGE> 333
ANNEX D List of Marks
ANNEX E List of Patents and Applications
ANNEX F List ofCopyrights and Applications
ANNEX G Assignment of Security Interest in United States
Trademarks and Patents
ANNEX H Assignment of Security Interest in United States
Copyrights
(iii)
<PAGE> 334
EXHIBIT J
U.S. SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of August 8, 1997, among each of the
undersigned (each an "Assignor", and together with any other entity that becomes
a party hereto pursuant to Section 10.12 hereof, the "Assignors") and Credit
Suisse First Boston, as Collateral Agent (the "Collateral Agent") for the
benefit of the Secured Creditors (as defined below). Except as otherwise defined
herein, capitalized terms used herein and defined in the Credit Agreement
referred to below shall be used herein as so defined.
W I T N E S S E T H :
WHEREAS, Alliance Gaming Corporation, Bally Wulff Vertriebs GmbH,
Bally Wulff Automaten GmbH (collectively, the "Borrowers" and each, a
"Borrower"), various lenders from time to time party thereto (the "Lenders"),
and Credit Suisse First Boston, as Administrative Agent (together with any
successor agent, the "Administrative Agent," and together with the Collateral
Agent and the Lenders, the "Lender Creditors"), have entered into a Credit
Agreement, dated as of August 8, 1997 (as amended, modified or supplemented from
time to time, the "Credit Agreement"), providing for the making of Loans to each
Borrower and the issuance of, and participation in, Letters of Credit for the
account of each Revolving Loan Borrower, all as contemplated therein;
WHEREAS, each Borrower may from time to time be party to (or
guaranty the obligations of one or more of its Subsidiaries under) one or more
(i) interest rate protection agreements, interest rate cap agreements, interest
rate collar agreements or other similar agreements or arrangements, (ii) foreign
exchange contracts, currency swap agreements or other similar agreements or
arrangements designed to protect against the fluctuations in currency values
and/or (iii) other types of hedging agreements from time to time with an Other
Creditor (as hereinafter defined) (collectively, the "Interest Rate Protection
Agreements or Other Hedging Agreements"), with a Lender or an affiliate of a
Lender (each such Lender or affiliate, even if the respective Lender
subsequently ceases to be a Lender under the Credit Agreement for any reason,
together with such Lender's or affiliate's successors and assigns, collectively,
the "Other Creditors," and together with the Lender Creditors, the "Secured
Creditors").
<PAGE> 335
EXHIBIT J
Page 2
WHEREAS, pursuant to the Parent Guaranty, the Parent Guarantor has
guaranteed to the Secured Creditors the payment when due of all obligations and
liabilities of each Guaranteed Party under or with respect to (x) the Credit
Documents and (y) each Interest Rate Protection Agreement or Other Hedging
Agreement with one or more Other Creditors;
WHEREAS, pursuant to the U.S. Subsidiaries Guaranty, each U.S.
Subsidiary Guarantor has jointly and severally guaranteed to the Secured
Creditors the payment when due of all the Guaranteed Obligations as described
therein;
WHEREAS, it is a condition precedent to the extensions of credit
under the Credit Agreement that each Assignor shall have executed and delivered
to the Collateral Agent this Agreement; and
WHEREAS, each Assignor will obtain benefits from the incurrence of
Loans and the Issuance of Letters of Credit under the Credit Agreement and the
entering into of Interest Rate Protection Agreements and Other Hedging
Agreements and, accordingly, each Assignor desires to execute this Agreement to
satisfy the condition described in the preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to each
Assignor, the receipt and sufficiency of which are hereby acknowledged, each
Assignor hereby makes the following representations and warranties to the
Collateral Agent for the benefit of the Secured Creditors and hereby covenants
and agrees with the Collateral Agent for the benefit of the Secured Creditors as
follows:
ARTICLE I
SECURITY INTERESTS
1.1. Grant of Security Interests. (a) As security for the prompt and
complete payment and performance when due of all of the Obligations of such
Assignor, each Assignor does hereby assign and transfer unto the Collateral
Agent, and does hereby pledge and grant to the Collateral Agent for the benefit
of the Secured Creditors, a continuing security interest of first priority in,
all of the right, title and interest of such Assignor in, to and under all of
the following, whether now existing or hereafter from time to time acquired: (i)
each and every Receivable, (ii) all Contracts, together with all Contract Rights
arising thereunder, (iii) all Inventory, (iv) all Equipment, (v) all Marks,
together with the registrations and right to all renewals thereof, and the
goodwill of the
<PAGE> 336
EXHIBIT J
Page 3
business of such Assignor symbolized by the Marks, (vi) all Patents, (vii) all
Copyrights, (viii) all computer programs of such Assignor and all intellectual
property rights therein and all Proprietary Information and Trade Secrets of
such Assignor, (ix) all other Goods, General Intangibles, Chattel Paper,
Documents and Instruments, (x) the Cash Collateral Account and all monies,
securities and instruments deposited or required to be deposited in such Cash
Collateral Account and (xi) all Proceeds and products of any and all of the
foregoing (all of the above, collectively, the "Collateral").
(b) The security interest of the Collateral Agent under this
Agreement extends to all Collateral of the kind which is the subject of this
Agreement which any Assignor may acquire at any time during the continuation of
this Agreement.
1.2. Power of Attorney. Each Assignor hereby constitutes and
appoints the Collateral Agent its true and lawful attorney, irrevocably, with
full power after the occurrence of and during the continuance of a Specified
Default (as hereinafter defined) (in the name of such Assignor or otherwise) to
act, require, demand, receive, compound and give acquittance for any and all
monies and claims for monies due or to become due to such Assignor under or
arising out of the Collateral, to endorse any checks or other instruments or
orders in connection therewith and to file any claims or take any action or
institute any proceedings which the Collateral Agent may deem to be necessary or
advisable to protect the interests of the Secured Creditors, which appointment
as attorney is coupled with an interest.
ARTICLE II
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Assignor represents, warrants and covenants, which
representations, warranties and covenants shall survive execution and delivery
of this Agreement, as follows:
2.1. Necessary Filings. All filings, registrations and recordings
necessary or appropriate to create, preserve and perfect the security interest
granted by such Assignor to the Collateral Agent hereby in respect of the
Collateral have been (or within 10 days after the Initial Borrowing Date will
be) accomplished and the security interest granted to the Collateral Agent
pursuant to this Agreement in and to the Collateral constitutes a perfected
security interest therein prior to the rights of all other Persons therein and
subject to no other Liens (other than Permitted Liens) and is entitled to all
the rights, priorities and benefits afforded by the Uniform Commercial Code or
other relevant law as enacted in any relevant jurisdiction to perfected security
interests, in each case to the extent that the
<PAGE> 337
EXHIBIT J
Page 4
Collateral consists of the type of property in which a security interest may be
perfected by filing a financial statement under the Uniform Commercial Code as
enacted in the relevant jurisdiction or in the United States Patent and
Trademark Office or United States Copyright Office.
2.2. No Liens. Such Assignor is, and as to Collateral acquired by it
from time to time after the date hereof such Assignor will be, the owner of all
Collateral pledged by it hereunder free from any Lien, security interest,
encumbrance or other right, title or interest of any Person (other than
Permitted Liens), and such Assignor shall defend the Collateral against all
claims and demands of all Persons at any time claiming the same or any interest
therein (other than in connection with Permitted Liens) adverse to the
Collateral Agent.
2.3. Other Financing Statements. As of the date hereof, there is no
financing statement (or similar statement or instrument of registration under
the law of any jurisdiction) covering or purporting to cover any interest of any
kind in the Collateral (other than financing statements filed in respect of
Permitted Liens), and so long as the Termination Date has not occurred, such
Assignor will not execute or authorize to be filed in any public office any
financing statement (or similar statement or instrument of registration under
the law of any jurisdiction) or statements relating to the Collateral, except
financing statements filed or to be filed in respect of and covering the
security interests granted hereby by such Assignor or in connection with
Permitted Liens.
2.4. Chief Executive Office; Records. As of the date hereof, the
chief executive office of such Assignor is located at the address indicated on
Annex A hereto for such Assignor. Such Assignor will not move its chief
executive office except to such new location as such Assignor may establish in
accordance with the last sentence of this Section 2.4. A complete set of books
of account and records of such Assignor relating to the Receivables and the
Contract Rights are, and will continue to be, kept at such chief executive
office, at one or more of the other record locations set forth on Annex A hereto
for such Assignor or at such new locations as such Assignor may establish in
accordance with the last sentence of this Section 2.4. All Receivables and
Contract Rights of such Assignor are, and will continue to be, maintained at,
and controlled and directed (including, without limitation, for general
accounting purposes) from, the office locations described above or such new
location established in accordance with the last sentence of this Section 2.4.
No Assignor shall establish new locations for such offices until (i) it shall
have given to the Collateral Agent not less than 15 days' prior written notice
of its intention to do so, clearly describing such new location and providing
such other information in connection therewith as the Collateral Agent may
reasonably request and (ii) with respect to such new location, it shall have
taken all action, reasonably satisfactory to the Collateral Agent, to maintain
<PAGE> 338
EXHIBIT J
Page 5
the security interest of the Collateral Agent in the Collateral intended to be
granted hereby at all times fully perfected and in full force and effect.
2.5. Location of Inventory and Equipment. All Inventory and
Equipment held on the date hereof by each Assignor is located at one of the
locations shown on Annex B hereto for such Assignor. Each Assignor agrees that
all Inventory and Equipment now held or subsequently acquired by it shall be
kept at (or shall be in transport to) any one of the locations shown on Annex B
hereto, or such new location as such Assignor may establish in accordance with
the next sentence of this Section 2.5. Any Assignor may establish a new location
for Inventory and Equipment only if (i) it shall have given to the Collateral
Agent not less than 15 days' prior written notice of its intention so to do,
clearly describing such new location and providing such other information in
connection therewith as the Collateral Agent may reasonably request and (ii)
with respect to such new location, it shall have taken all action reasonably
satisfactory to the Collateral Agent to maintain the security interest of the
Collateral Agent in the Collateral intended to be granted hereby at all times
fully perfected and in full force and effect. Notwithstanding anything to the
contrary contained in this Section 2.5, it is understood and agreed that (i) the
Assignors may hold Inventory and Equipment at locations other than those shown
on Annex B hereto so long as the aggregate fair market value of all such
Inventory and Equipment does not exceed $1,000,000 at any time and (ii) any
Assignor may hold Inventory and Equipment at a location other than those
identified on Annex B hereto so long as an effective UCC-1 financing statement
(or equivalent thereof) has been filed with the Secretary of State of the State
wherein such Inventory or Equipment is located (and, if necessary to create a
perfected security interest in such Inventory or Equipment, with the county
clerk of the county in which such Inventory or Equipment is located). Each
Assignor agrees from time to time upon the request of the Collateral Agent to
provide an updated Annex B which shall list the location of all Inventory and
Equipment held by each Assignor on the date such updated Annex B is prepared by
each Assignor.
2.6. Recourse. This Agreement is made with full recourse to each
Assignor and pursuant to and upon all the warranties, representations, covenants
and agreements on the part of such Assignor contained herein, in the other
Secured Debt Agreements and otherwise in writing in connection herewith or
therewith.
2.7. Trade Names; Change of Name. As of the date hereof, no Assignor
has or operates in any jurisdiction under, or in the preceding 12 months has had
or has operated in any jurisdiction under, any trade names, fictitious names or
other names except its legal name and such other trade or fictitious names as
are listed on Annex C hereto for such Assignor. No Assignor shall change its
legal name or assume or operate in any jurisdiction under any trade, fictitious
or other name except those names listed on Annex C hereto for such Assignor and
new names established in accordance with the last sentence
<PAGE> 339
EXHIBIT J
Page 6
of this Section 2.7. No Assignor shall assume or operate in any jurisdiction
under any new trade, fictitious or other name until (i) it shall have given to
the Collateral Agent not less than 15 days' prior written notice of its
intention so to do, clearly describing such new name and the jurisdictions in
which such new name shall be used and providing such other information in
connection therewith as the Collateral Agent may reasonably request and (ii)
with respect to such new name, it shall have taken all action reasonably
requested by the Collateral Agent, to maintain the security interest of the
Collateral Agent in the Collateral intended to be granted hereby at all times
fully perfected and in full force and effect.
ARTICLE III
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS
3.1. Additional Representations and Warranties. As of the time when
each of its Receivables arises, each Assignor shall be deemed to have
represented and warranted that such Receivable, and all records, papers and
documents relating thereto (if any) are what they purport to be and that all
papers and documents (if any) relating thereto (i) will, to the best knowledge
of the respective Assignor, represent the genuine, legal, valid and binding
obligation of the account debtor evidencing indebtedness unpaid and owed by the
respective account debtor arising out of the performance of labor or services or
the sale or lease and delivery of the merchandise listed therein, or both, (ii)
will be the only original writings evidencing and embodying such obligation of
the account debtor named therein (other than copies created for general
accounting purposes), (iii) will, to the best knowledge of the respective
Assignor, evidence true and valid obligations of the account debtor, enforceable
in accordance with their respective terms and (iv) will be in compliance and
will conform in all material respects with all applicable federal, state and
local laws and applicable laws of any relevant foreign jurisdiction, except
where the failure to so comply and confirm could not reasonably be expected to
have a material adverse effect on the validity or enforceability of any such
Receivables.
3.2. Maintenance of Records. Each Assignor will keep and maintain at
its own cost and expense, records of its Receivables and Contracts and such
Assignor will make the same available on such Assignor's premises to the
Collateral Agent for inspection, at such Assignor's own cost and expense, at any
and all reasonable times upon reasonable prior notice to such Assignor. Upon the
occurrence and during the continuance of an Event of Default and at the
reasonable request of the Collateral Agent, such Assignor shall, at its own cost
and expense, deliver all tangible evidence of its Receivables and Contract
Rights (including, without limitation, all documents evidencing the Receivables
and all Contracts) and such books and records to the Collateral Agent or to its
representatives (copies of
<PAGE> 340
EXHIBIT J
Page 7
which evidence and books and records may be retained by such Assignor). If the
Collateral Agent so directs, upon the occurrence and during the continuance of
an Event of Default, such Assignor shall legend, in form and manner reasonably
satisfactory to the Collateral Agent, the Receivables and the Contracts, as well
as books, records and documents of such Assignor evidencing or pertaining to
such Receivables and Contracts with an appropriate reference to the fact that
such Receivables and Contracts have been assigned to the Collateral Agent and
that the Collateral Agent has a security interest therein.
3.3. Direction to Account Debtors; Contracting Parties; etc. Upon
the occurrence and during the continuance of a Default under Section 10.01 or
10.05 of the Credit Agreement, any other payment default in respect of the
Obligations, or any Event of Default under the Credit Agreement (with each such
Default or Event of Default being herein called a "Specified Default"), and if
the Collateral Agent so directs any Assignor, such Assignor agrees (x) to cause
all payments on account of the Receivables and Contracts to be made directly to
the Cash Collateral Account, (y) that the Collateral Agent may, at its option,
directly notify the obligors with respect to any Receivables and/or under any
Contracts to make payments with respect thereto as provided in preceding clause
(x) and (z) that the Collateral Agent may enforce collection of any such
Receivables and Contracts and may adjust, settle or compromise the amount of
payment thereof, in the same manner and to the same extent as such Assignor.
Without notice to or assent by any Assignor, the Collateral Agent may apply any
or all amounts then in, or thereafter deposited in, the Cash Collateral Account
which application shall be effected in the manner provided in Section 7.4 of
this Agreement. The reasonable costs and expenses (including reasonable
attorneys' fees) of collection, whether incurred by the relevant Assignor or the
Collateral Agent, shall be borne by the relevant Assignor. The Collateral Agent
shall deliver a copy of each notice referred to in the preceding clause (y) to
the relevant Assignor; provided, that the failure by the Collateral Agent to so
notify such Assignor shall not affect the effectiveness of such notice or the
other rights of the Collateral Agent created by this Section 3.3.
3.4. Modification of Terms; etc. No Assignor shall rescind or cancel
any indebtedness evidenced by any Receivable or under any Contract, or modify
any term thereof or make any adjustment with respect thereto, or extend or renew
the same, or compromise or settle any material dispute, claim, suit or legal
proceeding relating thereto, or sell any Receivable or Contract, or interest
therein, without the prior written consent of the Collateral Agent, other than
at times when no direction has been given by the Collateral Agent which is then
in effect pursuant to preceding Section 3.3. Each Assignor will duly fulfill all
obligations on its part to be fulfilled under or in connection with the
Receivables and Contracts and will do nothing to impair the rights of the
Collateral Agent in the Receivables or Contracts.
<PAGE> 341
EXHIBIT J
Page 8
3.5. Collection. Each Assignor shall endeavor in accordance with
reasonable business practices to cause to be collected from the account debtor
named in each of its Receivables or obligor under any Contract, as and when due
(including, without limitation, amounts which are delinquent, such amounts to be
collected in accordance with generally accepted lawful collection procedures)
any and all amounts owing under or on account of such Receivable or Contract (as
adjusted or modified from time to time), and apply forthwith upon receipt
thereof all such amounts as are so collected to the outstanding balance of such
Receivable or under such Contract, except that, at all times other than at times
when the Collateral Agent has given any direction which is then in effect
pursuant to preceding Section 3.3, any Assignor may allow in the ordinary course
of business as adjustments to amounts owing under its Receivables and Contracts
(i) an extension or renewal of the time or times of payment, or settlement for
less than the total unpaid balance, which such Assignor finds appropriate in
accordance with reasonable business judgment and (ii) a refund or credit due as
a result of returned or damaged merchandise or improperly performed services or
for other reasons which such Assignor finds appropriate in accordance with
reasonable business judgment. The reasonable costs and expenses (including,
without limitation, reasonable attorneys' fees) of collection, whether incurred
by an Assignor or the Collateral Agent, shall be borne by the relevant Assignor.
3.6. Instruments. If any Assignor owns or acquires any Instrument
constituting Collateral, such Assignor will promptly deliver such Instrument to
the Collateral Agent appropriately endorsed to the order of the Collateral Agent
as further security hereunder.
3.7. Assignors Remain Liable Under Receivables. Anything herein to
the contrary notwithstanding, the Assignors shall remain liable under each of
the Receivables to observe and perform all of the conditions and obligations to
be observed and performed by it thereunder, all in accordance with the terms of
any agreement giving rise to such Receivables. Neither the Collateral Agent nor
any other Secured Creditor shall have any obligation or liability under any
Receivable (or any agreement giving rise thereto) by reason of or arising out of
this Agreement or the receipt by the Collateral Agent or any other Secured
Creditor of any payment relating to such Receivable pursuant hereto, nor shall
the Collateral Agent or any other Secured Creditor be obligated in any manner to
perform any of the obligations of any Assignor under or pursuant to any
Receivable (or any agreement giving rise thereto), to make any payment, to make
any inquiry as to the nature or the sufficiency of any payment received by them
or as to the sufficiency of any performance by any party under any Receivable
(or any agreement giving rise thereto), to present or file any claim, to take
any action to enforce any performance or to collect the payment of any amounts
which may have been assigned to them or to which they may be entitled at any
time or times.
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3.8. Assignors Remain Liable Under Contracts. Anything herein to the
contrary notwithstanding, the Assignors shall remain liable under each of the
Contracts to observe and perform all of the conditions and obligations to be
observed and performed by them thereunder, all in accordance with and pursuant
to the terms and provisions of each Contract. Neither the Collateral Agent nor
any other Secured Creditor shall have any obligation or liability under any
Contract by reason of or arising out of this Agreement or the receipt by the
Collateral Agent or any other Secured Creditor of any payment relating to such
contract pursuant hereto, nor shall the Collateral Agent or any other Secured
Creditor be obligated in any manner to perform any of the obligations of any
Assignor under or pursuant to any Contract, to make any payment, to make any
inquiry as to the nature or the sufficiency of any performance by any party
under any Contract, to present or file any claim, to take any action to enforce
any performance or to collect the payment of any amounts which may have been
assigned to them or to which they may be entitled at any time or times.
3.9. Further Actions. Each Assignor will, at its own expense, make,
execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from
time to time such schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, power of attorney, certificates, reports and
other assurances or instruments and take such further steps relating to its
Receivables, Contracts, Instruments and other property or rights covered by the
security interest hereby granted, as the Collateral Agent may reasonably
require.
ARTICLE IV
SPECIAL PROVISIONS CONCERNING TRADEMARKS
4.1. Additional Representations and Warranties. Each Assignor
represents and warrants that, as of the date hereof, it is the true and lawful
owner of all right, title and interest to, or otherwise has the right to use the
registered Marks listed in Annex D hereto for such Assignor and that said listed
Marks constitute all the marks and applications for marks registered in the
United States Patent and Trademark Office that such Assignor presently owns or
uses in connection with its business. Each Assignor represents and warrants that
it owns, is licensed to use or otherwise has the right to use all material Marks
that it uses. Each Assignor further warrants that it has no actual knowledge of
any third party claim that any aspect of such Assignor's present or contemplated
business operations infringes or will infringe any trademark, service mark or
trade name. Each Assignor represents and warrants that it is the beneficial and
record owner of all trademark registrations and applications listed in Annex D
hereto for such Assignor and that said registrations are valid and subsisting,
and that such Assignor is not aware of any third-party
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claim that any of said registrations in respect of any Mark is invalid or
unenforceable. Each Assignor hereby grants to the Collateral Agent an absolute
power of attorney to sign, upon the occurrence and during the continuance of a
Specified Default, any document which may be required by the United States
Patent and Trademark Office in order to effect an absolute assignment of all
right, title and interest in each Mark, and record the same.
4.2. Infringements. Each Assignor agrees, promptly upon learning
thereof, to notify the Collateral Agent in writing of the name and address of,
and to furnish such pertinent information that may be available with respect to,
any party who such Assignor believes is infringing or diluting or otherwise
violating in any material respect any of such Assignor's rights in and to any
Mark, or with respect to any party, which Assignor has actual knowledge,
claiming that such Assignor's use of any Mark violates in any material respect
any property right of that party. Each Assignor further agrees, unless otherwise
agreed by the Collateral Agent, to prosecute any Person infringing any Mark in
accordance with reasonable business practices.
4.3. Preservation of Marks. Each Assignor agrees to use its Marks in
interstate commerce during the time in which this Agreement is in effect,
sufficiently to preserve such Marks as trademarks or service marks under the
laws of the United States and any other applicable law; provided, that no
Assignor shall be obligated to preserve any Mark in the event such Assignor
determines, in its reasonable business judgment, that the preservation of such
Mark is no longer desirable in the conduct of its business.
4.4. Maintenance of Registration. Each Assignor shall, at its own
expense, diligently process all documents required by the Trademark Act of 1946,
15 U.S.C. SectionSection 1051 et seq. to maintain trademark registrations,
including but not limited to affidavits of use and applications for renewals of
registration in the United States Patent and Trademark Office for all of its
registered Marks pursuant to 15 U.S.C. SectionSection 1058(a), 1059 and 1065,
and shall pay all fees and disbursements in connection therewith and shall not
abandon any such filing of affidavit of use or any such application of renewal
prior to the exhaustion of all administrative and judicial remedies without
prior written consent of the Collateral Agent; provided, that no Assignor shall
be obligated to maintain any Mark in the event that such Assignor determines, in
its reasonable business judgment, that the maintenance of such Mark is no longer
necessary or desirable in the conduct of its business.
4.5. Future Registered Marks. If any Mark registration issues
hereafter to any Assignor as a result of any application now or hereafter
pending before the United States Patent and Trademark Office, within 60 Business
Days of receipt of such certificate, such Assignor shall deliver to the
Collateral Agent a copy of such certificate, and an assignment for security in
such Mark, to the Collateral Agent and at the expense of such Assignor,
confirming the assignment for security in such Mark to the Collateral Agent
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hereunder, the form of such security to be substantially the same as the form
hereof or in such other form as may be reasonably satisfactory to the Collateral
Agent.
4.6. Remedies. If a Specified Default shall occur and be continuing,
the Collateral Agent may take any or all of the following actions: (i) declare
the entire right, title and interest of such Assignor in and to each of the
Marks, together with all trademark rights and rights of protection to the same,
vested in the Collateral Agent for the benefit of the Secured Creditors, in
which event such rights, title and interest shall immediately vest, in the
Collateral Agent for the benefit of the Secured Creditors, and the Collateral
Agent shall be entitled to exercise the power of attorney referred to in Section
4.1 hereof to execute, cause to be acknowledged and notarized and record said
absolute assignment with the applicable agency; (ii) take and use or sell the
Marks and the goodwill of such Assignor's business symbolized by the Marks and
the right to carry on the business and use the assets of such Assignor in
connection with which the Marks have been used; and (iii) direct such Assignor
to refrain, in which event such Assignor shall refrain, from using the Marks in
any manner whatsoever, directly or indirectly, and, if requested by the
Collateral Agent, change such Assignor's corporate name to eliminate therefrom
any use of any Mark and execute such other and further documents that the
Collateral Agent may request to further confirm this and to transfer ownership
of the Marks and registrations and any pending trademark application in the
United States Patent and Trademark Office to the Collateral Agent.
4.7. Override Provisions Relating to Bally Trademark License
Agreement. For purposes of Section 6(b) of the Third Amendment to Trademark
License Agreement and Settlement Agreement dated as of May 10, 1996, by and
among Bally Entertainment Corporation ("Bally"), the U.S. Borrower and BGII
Acquisition Corp. (the "Third Amendment"), a true, correct and complete copy of
which has been delivered to the Collateral Agent, the Collateral Agent
acknowledges and agrees (and each Secured Creditor, by accepting the benefits of
this Agreement, also acknowledges and agrees) that (a) any transfer (whether by
foreclosure or otherwise) of "Inventory" (as such term is defined in such Third
Amendment) effected by the Collateral Agent shall be subject to the royalty and
rebate provisions of the Bally Trademark License Agreement (as defined below) so
that the Collateral Agent (or the Secured Creditors) shall have paid or caused
to be paid to Bally, simultaneously with any such transfer, the royalty per
machine due to Bally by reason of such transfer, (b) any transfer (whether by
foreclosure or otherwise) of rights under the Bally Trademark License Agreement
effected by the Collateral Agent (or the Secured Creditors) shall be subject to
the condition precedent that the prospective transferee shall have agreed in
writing to be bound by the provisions of the Bally Trademark License Agreement;
and (c) any foreclosure by the Collateral Agent (or the Secured Creditors)
(whether involving stock or assets of the U.S. Borrower or any of its
affiliates) that would result in any transfer or change in ownership or control,
direct or indirect, of Bally Gaming
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International, Inc. ("BGI") or BGI's rights under the Bally Trademark License
Agreement shall comply with all of the provisions of the Bally Trademark License
Agreement applicable thereto (including, without limitation, the provisions of
Section 9 of the Amended and Restated Trademark License Agreement referred to
below and Section 6 of the Third Amendment). For purposes hereof, the term
"Bally Trademark License Agreement" shall mean, collectively, the Amended and
Restated Trademark License Agreement, dated as of July 8, 1992, between Bally
and BGI, the Second Amendment to Trademark License Agreement and Settlement
Agreement, dated as of March 31, 1995, between Bally, BGI and Bally Gaming, Inc.
and the Third Amendment.
ARTICLE V
SPECIAL PROVISIONS CONCERNING
PATENTS, COPYRIGHTS AND TRADE SECRETS
5.1. Additional Representations and Warranties. Each Assignor
represents and warrants that it is the true and lawful owner of all rights in
(i) all Trade Secrets and Proprietary Information necessary to operate the
business of such Assignor, (ii) the Patents listed in Annex E hereto for such
Assignor and that said Patents constitute all the patents and applications for
patents that such Assignor owns and (iii) the Copyrights listed in Annex F
hereto for such Assignor and that said Copyrights constitute all registrations
of copyrights and applications for copyright registrations that such Assignor
owns. Each Assignor further warrants that it has no actual knowledge of any
third party claim that any aspect of such Assignor's present or contemplated
business operations infringes or will infringe any patent or any copyright or
such Assignor has misappropriated any Trade Secret or Proprietary Information.
Each Assignor hereby grants to the Collateral Agent an absolute power of
attorney to sign, upon the occurrence and during the continuance of a Specified
Default, any document which may be required by the United States Patent and
Trademark Office or the United States Copyright Office in order to effect an
absolute assignment of all right, title and interest in each Patent and
Copyright, and to record the same.
5.2. Infringements. Each Assignor agrees, promptly upon learning
thereof, to furnish the Collateral Agent in writing with all pertinent
information available to such Assignor with respect to any infringement,
contributing infringement or active inducement to infringe in any respect any
material Patent or material Copyright or to any claim that the practice of any
material Patent or the use of any material Copyright violates in any material
respect any property right of a third party, or with respect to any
misappropriation of any Trade Secret or any claim that practice of any Trade
Secret violates in any material respect any property right of a third party.
Each Assignor further agrees, to the extent consistent
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with reasonable business practices, to prosecute any Person infringing any
Patent or Copyright or any Person misappropriating any Trade Secret.
5.3. Maintenance of Patents. At its own expense, each Assignor shall
make timely payment of all post-issuance fees required pursuant to 35 U.S.C.
Section 41 to maintain in force rights under each Patent, absent prior written
consent of the Collateral Agent; provided, that no Assignor shall be obligated
to maintain any Patent in the event such Assignor determines, in its reasonable
business judgment, that the maintenance of such Patent is no longer necessary or
desirable in the conduct of its business.
5.4. Prosecution of Patent Application. At its own expense, each
Assignor shall diligently prosecute all applications for Patents for such
Assignor and shall not abandon any such application prior to exhaustion of all
administrative and judicial remedies, absent written consent of the Collateral
Agent; provided, that no Assignor shall be obligated to prosecute any
application in the event such Assignor determines, in its reasonable business
judgment, that the prosecuting of such application is no longer necessary or
desirable in the conduct of its business.
5.5. Other Patents and Copyrights. Within 30 Business Days of the
acquisition or issuance of a Patent, registration of a Copyright, or acquisition
of a registered copyright, the relevant Assignor shall deliver to the Collateral
Agent a copy of said Copyright or certificate or registration of said patents,
as the case may be, with an assignment for security as to such Patent or
Copyright, as the case may be, to the Collateral Agent and at the expense of
such Assignor, confirming the assignment for security, the form of such
assignment for security to be substantially the same as the form hereof or in
such other form as may be reasonably satisfactory to the Collateral Agent.
5.6. Remedies. If a Specified Default shall occur and be continuing,
the Collateral Agent may take any or all of the following actions: (i) declare
the entire right, title, and interest of such Assignor in each of the Patents
and Copyrights vested in the Collateral Agent for the benefit of the Secured
Creditors, in which event such right, title, and interest shall immediately vest
in the Collateral Agent for the benefit of the Secured Creditors, in which case
the Collateral Agent shall be entitled to exercise the power of attorney
referred to in Section 5.1 hereof to execute, cause to be acknowledged and
notarized and to record said absolute assignment with the applicable agency;
(ii) take and practice or sell the Patents and Copyrights; and (iii) direct such
Assignor to refrain, in which event such Assignor shall refrain, from practicing
the Patents and using the Copyrights directly or indirectly, and such Assignor
shall execute such other and further documents as the Collateral Agent may
request further to confirm this and to transfer ownership of the Patents and
Copyrights to the Collateral Agent for the benefit of the Secured Creditors.
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ARTICLE VI
PROVISIONS CONCERNING ALL COLLATERAL
6.1. Protection of Collateral Agent's Security. Each Assignor will
at all times keep its Inventory and Equipment insured in favor of the Collateral
Agent, at such Assignor's own expense to the extent and in the manner provided
in the Secured Debt Agreements; all policies or certificates with respect to
such insurance (and any other insurance maintained by such Assignor) (i) shall
be endorsed to the Collateral Agent's reasonable satisfaction for the benefit of
the Collateral Agent (including, without limitation, by naming the Collateral
Agent as additional insured and loss payee) and (ii) shall state that such
insurance policies shall not be cancelled without 30 days' prior written notice
thereof by the insurer to the Collateral Agent; and certified copies of such
policies or certificates with respect thereto shall be deposited with the
Collateral Agent. If any Assignor shall fail to insure its Inventory and
Equipment in accordance with the preceding sentence, or if any Assignor shall
fail to so endorse and deposit all policies or certificates with respect
thereto, the Collateral Agent shall have the right (but shall be under no
obligation), upon prior written notice to such Assignor, to procure such
insurance and such Assignor agrees to promptly reimburse the Collateral Agent
for all reasonable costs and expenses of procuring such insurance. The
Collateral Agent shall, at the time any proceeds of such insurance are
distributed to the Secured Creditors, apply such proceeds in accordance with
Section 7.4 hereof. Each Assignor assumes all liability and responsibility in
connection with the Collateral acquired by it and the liability of such Assignor
to pay the Obligations shall in no way be affected or diminished by reason of
the fact that such Collateral may be lost, destroyed, stolen, damaged or for any
reason whatsoever unavailable to such Assignor.
6.2. Further Actions. Each Assignor will, at its own expense, make,
execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from
time to time such lists, descriptions and designations of its Collateral,
warehouse receipts, receipts in the nature of warehouse receipts, bills of
lading, documents of title, vouchers, invoices, schedules, confirmatory
assignments, conveyances, financing statements, transfer endorsements, powers of
attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the security interest hereby granted, which the Collateral Agent
deems reasonably appropriate or advisable to perfect, preserve or protect its
security interest in the Collateral.
6.3. Financing Statements. Each Assignor agrees to execute and
deliver to the Collateral Agent such financing statements, in form reasonably
acceptable to the Collateral Agent, as the Collateral Agent may from time to
time reasonably request or as are necessary or desirable in the reasonable
opinion of the Collateral Agent to establish and
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maintain a valid, enforceable, first priority perfected security interest in the
Collateral as provided herein and the other rights and security contemplated
hereby all in accordance with the UCC as enacted in any and all relevant
jurisdictions or any other relevant law. Each Assignor will pay any applicable
filing fees, recordation taxes and related expenses relating to its Collateral.
Each Assignor hereby authorizes the Collateral Agent to file any such financing
statements without the signature of such Assignor where permitted by law.
6.4. Assistance with Gaming Approvals. Each Assignor agrees to
assist the Collateral Agent in obtaining all approvals of any Gaming Authority
or other governmental authority that are required by law, including, without
limitation, the Applicable Gaming Regulations, in connection with any action or
transaction contemplated by this Agreement and, at the request of the Collateral
Agent after and during an Event of Default, to prepare, sign and file with the
appropriate Gaming Authority such Assignor's portion of any application for
consent to the transfer of any Collateral necessary or appropriate under
Applicable Gaming Regulations for approval by such Gaming Authority of any sale
or transfer of such Collateral pursuant to the exercise of the Collateral
Agent's (or Secured Creditors') remedies hereunder and under the Credit
Documents.
ARTICLE VII
REMEDIES UPON OCCURRENCE OF SPECIFIED DEFAULT
7.1. Remedies; Obtaining the Collateral Upon Default. Each Assignor
agrees that, if a Specified Default shall have occurred and be continuing, then
and in every such case, the Collateral Agent, in addition to any rights now or
hereafter existing under applicable law, shall have all rights as a secured
creditor under the UCC in all relevant jurisdictions and may:
(i) personally, or by agents or attorneys, immediately take
possession of the Collateral or any part thereof, from such Assignor or
any other Person who then has possession of any part thereof with or
without notice or process of law, and for that purpose may enter upon such
Assignor's premises where any of the Collateral is located and remove the
same and use in connection with such removal any and all services,
supplies, aids and other facilities of such Assignor;
(ii) instruct the obligor or obligors on any agreement, instrument or
other obligation (including, without limitation, the Receivables and the
Contracts) constituting the Collateral to make any payment required by the
terms of such agreement, instrument or other obligation directly to the
Collateral Agent;
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(iii) withdraw all monies, securities and instruments in the Cash
Collateral Account and/or in any other cash collateral account for
application to the Obligations in accordance with Section 7.4 hereof;
(iv) sell, assign or otherwise liquidate any or all of the
Collateral or any part thereof in accordance with Section 7.2 hereof, or
direct the relevant Assignor to sell, assign or otherwise liquidate any or
all of the Collateral or any part thereof, and, in each case, take
possession of the proceeds of any such sale or liquidation;
(v) take possession of the Collateral or any part thereof, by
directing the relevant Assignor in writing to deliver the same to the
Collateral Agent at any place or places designated by the Collateral
Agent, in which event such Assignor shall at its own expense:
(x) forthwith cause the same to be moved to the place or
places so designated by the Collateral Agent and there delivered to
the Collateral Agent;
(y) store and keep any Collateral so delivered to the
Collateral Agent at such place or places pending further action by
the Collateral Agent as provided in Section 7.2 hereof; and
(z) while the Collateral shall be so stored and kept, provide
such guards and maintenance services as shall be necessary to
protect the same and to preserve and maintain them in good
condition; and
(vi) license or sublicense, whether on an exclusive or nonexclusive
basis, any Marks, Patents or Copyrights included in the Collateral for
such term and on such conditions and in such manner as the Collateral
Agent shall in its sole judgment determine;
it being understood that each Assignor's obligation so to deliver the Collateral
is of the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Collateral Agent shall be entitled to a
decree requiring specific performance by such Assignor of said obligation. The
Secured Creditors agree that this Agreement may be enforced only by the action
of the Collateral Agent acting upon the instructions of the Required Lenders
(or, after the date on which all Credit Document Obligations have been paid in
full, the holders of at least the majority of the Other Obligations) and that no
other Secured Creditor shall have any right individually to seek to enforce this
Agreement or to realize upon the security to be granted hereby, it being
understood and agreed that such rights and remedies may be exercised by the
Collateral
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Agent or the holders of at least a majority of the outstanding Other
Obligations, as the case may be, for the benefit of the Secured Creditors upon
the terms of this Agreement.
7.2. Remedies; Disposition of the Collateral. Any Collateral
repossessed by the Collateral Agent under or pursuant to Section 7.1 hereof and
any other Collateral whether or not so repossessed by the Collateral Agent, may
be sold, assigned, leased or otherwise disposed of under one or more contracts
or as an entirety, and without the necessity of gathering at the place of sale
the property to be sold, and in general in such manner, at such time or times,
at such place or places and on such terms as the Collateral Agent may, in
compliance with any mandatory requirements of applicable law, determine to be
commercially reasonable. Any of the Collateral may be sold, leased or otherwise
disposed of, in the condition in which the same existed when taken by the
Collateral Agent or after any overhaul or repair at the expense of the relevant
Assignor which the Collateral Agent shall determine to be commercially
reasonable, provided that the Collateral Agent shall first apply for and receive
all required approvals of any applicable Gaming Authority for the sale of
disposition of slot machines and other gaming devices. Any such disposition
which shall be pursuant to a private sale or other private proceedings permitted
by such requirements shall be made upon not less than 10 Business Days' written
notice to the relevant Assignor specifying the time at which such disposition is
to be made and the intended sale price or other consideration therefor, and
shall be subject, for the 10 Business Days after the giving of such notice, to
the right of the relevant Assignor or any nominee of such Assignor to acquire
the Collateral involved at a price or for such other consideration at least
equal to the intended sale price or other consideration so specified. Any such
disposition which shall be a public sale permitted by such requirements shall be
made upon not less than 10 days' written notice to the relevant Assignor
specifying the time and place of such sale and, in the absence of applicable
requirements of law, shall be by public auction (which may, at the Collateral
Agent's option, be subject to reserve), after publication of notice of such
auction not less than 10 days prior thereto in two newspapers in general
circulation in the City of New York. The Collateral Agent may also request, in
connection therewith, that the Nevada Gaming Commission petition a District
Court of the State of Nevada for the appointment of a supervisor to conduct the
normal gaming activities on the premises of any non-restricted licensed location
following appointment of a receiver. To the extent permitted by any such
requirement of law, the Collateral Agent may bid for and become the purchaser of
the Collateral or any item thereof, offered for sale in accordance with this
Section without accountability to the relevant Assignor. If, under mandatory
requirements of applicable law, the Collateral Agent shall be required to make
disposition of the Collateral within a period of time which does not permit the
giving of notice to the relevant Assignor as hereinabove specified, the
Collateral Agent need give such Assignor only such notice of disposition as
shall be reasonably practicable in view of such mandatory requirements of
applicable law.
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7.3. Waiver of Claims. Except as otherwise provided in this
Agreement, EACH ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S
TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE
COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING
FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH SUCH ASSIGNOR
WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES
OR OF ANY STATE, and each Assignor hereby further waives, to the extent
permitted by law:
(i) all damages occasioned by such taking of possession except any
damages which are the direct result of the Collateral Agent's gross
negligence or willful misconduct;
(ii) all other requirements as to the time, place and terms of sale
or other requirements with respect to the enforcement of the Collateral
Agent's rights hereunder; and
(iii) all rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any applicable law
in order to prevent or delay the enforcement of this Agreement or the
absolute sale of the Collateral or any portion thereof, and each Assignor,
for itself and all who may claim under it, insofar as it or they now or
hereafter lawfully may, hereby waives the benefit of all such laws.
Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of the relevant Assignor therein and
thereto, and shall be a perpetual bar both at law and in equity against such
Assignor and against any and all Persons claiming or attempting to claim the
Collateral so sold, optioned or realized upon, or any part thereof, from,
through and under such Assignor.
7.4. Application of Proceeds. (a) All moneys collected by the
Collateral Agent (or, to the extent the U.S. Pledge Agreement or any Mortgage or
any other Security Document requires proceeds of collateral under such Security
Documents to be applied in accordance with the provisions of this Agreement, the
Pledgee, Mortgagee or Collateral Agent under such other Security Document) upon
any sale or other disposition of the Collateral, together with all other moneys
received by the Collateral Agent hereunder, shall be applied as follows:
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(i) first, to the payment of all Obligations owing the Collateral
Agent of the type provided in clauses (iii) and (iv) of the definition of
Obligations;
(ii) second, to the extent proceeds remain after the application
pursuant to the preceding clause (i), an amount equal to the outstanding
Primary Obligations shall be paid to the Secured Creditors as provided in
Section 7.4(e) hereof, with each Secured Creditor receiving an amount
equal to such outstanding Primary Obligations or, if the proceeds are
insufficient to pay in full all such Primary Obligations, its Pro Rata
Share of the amount remaining to be distributed; and
(iii) third, to the extent proceeds remain after the application
pursuant to the preceding clauses (i) and (ii), an amount equal to the
outstanding Secondary Obligations shall be paid to the Secured Creditors
as provided in Section 7.4(e) hereof, with each Secured Creditor receiving
an amount equal to its outstanding Secondary Obligations or, if the
proceeds are insufficient to pay in full all such Secondary Obligations,
its Pro Rata Share of the amount remaining to be distributed; and
(iv) fourth, to the extent proceeds remain after the application
pursuant to the preceding clauses (i) through (iii), inclusive, and
following the termination of this Agreement pursuant to Section 10.8(a)
hereof, to the relevant Assignor or to whomever may be lawfully entitled
to receive such surplus.
(b) For purposes of this Agreement (x) "Pro Rata Share" shall mean,
when calculating a Secured Creditor's portion of any distribution or amount,
that amount (expressed as a percentage) equal to a fraction the numerator of
which is the then unpaid amount of such Secured Creditor's Primary Obligations
or Secondary Obligations, as the case may be, and the denominator of which is
the then outstanding amount of all Primary Obligations or Secondary Obligations,
as the case may be, (y) "Primary Obligations" shall mean (i) in the case of the
Credit Document Obligations, all obligations and liabilities of each Assignor
arising out of or in connection with the principal of, and interest on, all
Loans, all Unpaid Drawings theretofore made (together with all interest accrued
thereon), and the aggregate Stated Amounts of all Letters of Credit issued under
the Credit Agreement, and all Fees and (ii) in the case of the Other
Obligations, all amounts due under the Interest Rate Protection Agreements or
Other Hedging Agreements, (other than indemnities, fees (including, without
limitation, attorneys' fees) and similar obligations and liabilities) and (z)
"Secondary Obligations" shall mean all Obligations other than Primary
Obligations.
(c) When payments to Secured Creditors are based upon their
respective Pro Rata Shares, the amounts received by such Secured Creditors
hereunder shall be applied (for purposes of making determinations under this
Section 7.4 only) (i) first, to their
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Primary Obligations and (ii) second, to their Secondary Obligations. If any
payment to any Secured Creditor of its Pro Rata Share of any distribution would
result in overpayment to such Secured Creditor, such excess amount shall instead
be distributed in respect of the unpaid Primary Obligations or Secondary
Obligations, as the case may be, of the other Secured Creditors, with each
Secured Creditor whose Primary Obligations or Secondary Obligations, as the case
may be, have not been paid in full to receive an amount equal to such excess
amount multiplied by a fraction the numerator of which is the unpaid Primary
Obligations or Secondary Obligations, as the case may be, of such Secured
Creditor and the denominator of which is the unpaid Primary Obligations or
Secondary Obligations, as the case may be, of all Secured Creditors entitled to
such distribution.
(d) Each of the Secured Creditors agrees and acknowledges that if
the Lender Creditors are to receive a distribution on account of undrawn amounts
with respect to Letters of Credit issued under the Credit Agreement (which shall
only occur after all outstanding Loans and Unpaid Drawings with respect to such
Letters of Credit have been paid in full), such amounts shall be paid to the
Administrative Agent under the Credit Agreement and held by it, for the equal
and ratable benefit of the Lender Creditors, as cash security for the repayment
of Obligations owing to the Lender Creditors as such. If any amounts are held as
cash security pursuant to the immediately preceding sentence, then upon the
termination of all outstanding Letters of Credit, and after the application of
all such cash security to the repayment of all Obligations owing to the Lender
Creditors after giving effect to the termination of all such Letters of Credit,
if there remains any excess cash, such excess cash shall be returned by the
Administrative Agent to the Collateral Agent for distribution in accordance with
Section 7.4(a) hereof.
(e) Except as set forth in Section 7.4(d) hereof, all payments
required to be made hereunder shall be made (x) if to the Lender Creditors, to
the Administrative Agent under the Credit Agreement for the account of the
Lender Creditors, and (y) if to the Other Creditors, to the trustee, paying
agent or other similar representative (each a "Representative") for the Other
Creditors or, in the absence of such a Representative, directly to the Other
Creditors.
(f) For purposes of applying payments received in accordance with
this Section 7.4, the Collateral Agent shall be entitled to rely upon (i) the
Administrative Agent under the Credit Agreement and (ii) the Representative for
the Other Creditors or, in the absence of such a Representative, upon the Other
Creditors for a determination (which the Administrative Agent, each
Representative for any Other Creditors and the Secured Creditors agree (or shall
agree) to provide upon request of the Collateral Agent) of the outstanding
Primary Obligations and Secondary Obligations owed to the Lender Creditors or
the Other Creditors, as the case may be. Unless it has actual knowledge
(including by way of written notice from a Lender Creditor or an Other Creditor)
to the contrary, the
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Administrative Agent and each Representative, in furnishing information pursuant
to the preceding sentence, and the Collateral Agent, in acting hereunder, shall
be entitled to assume that no Secondary Obligations are outstanding. Unless it
has actual knowledge (including by way of written notice from a Representative
for an Other Creditor or directly from an Other Creditor) to the contrary, the
Collateral Agent, in acting hereunder, shall be entitled to assume that no
Interest Rate Protection Agreements or Other Hedging Agreements are in
existence.
(g) It is understood and agreed that the Assignors shall remain
jointly and severally liable to the extent of any deficiency between the amount
of the proceeds of the Collateral hereunder and the aggregate amount of the
Obligations.
7.5. Remedies Cumulative. Each and every right, power and remedy
hereby specifically given to the Collateral Agent shall be in addition to every
other right, power and remedy specifically given under this Agreement, the other
Secured Debt Agreements or now or hereafter existing at law, in equity or by
statute and each and every right, power and remedy whether specifically herein
given or otherwise existing may be exercised from time to time or simultaneously
and as often and in such order as may be deemed expedient by the Collateral
Agent. All such rights, powers and remedies shall be cumulative and the exercise
or the beginning of the exercise of one shall not be deemed a waiver of the
right to exercise any other or others. No delay or omission of the Collateral
Agent in the exercise of any such right, power or remedy and no renewal or
extension of any of the Obligations shall impair any such right, power or remedy
or shall be construed to be a waiver of any Default or Event of Default or an
acquiescence therein. No notice to or demand on any Assignor in any case shall
entitle it to any other or further notice or demand in similar or other
circumstances or constitute a waiver of any of the rights of the Collateral
Agent to any other or further action in any circumstances without notice or
demand. In the event that the Collateral Agent shall bring any suit to enforce
any of its rights hereunder and shall be entitled to judgment, then in such suit
the Collateral Agent may recover reasonable expenses, including reasonable
attorneys' fees, and the amounts thereof shall be included in such judgment.
7.6. Discontinuance of Proceedings. In case the Collateral Agent
shall have instituted any proceeding to enforce any right, power or remedy under
this Agreement by foreclosure, sale, entry or otherwise, and such proceeding
shall have been discontinued or abandoned for any reason or shall have been
determined adversely to the Collateral Agent, then and in every such case the
relevant Assignor, the Collateral Agent and each holder of any of the
Obligations shall be restored to their former positions and rights hereunder
with respect to the Collateral subject to the security interest created under
this Agreement, and all rights, remedies and powers of the Collateral Agent
shall continue as if no such proceeding had been instituted.
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ARTICLE VIII
INDEMNITY
8.1. Indemnity. (a) Each Assignor jointly and severally agrees to
indemnify, reimburse and hold the Collateral Agent, each other Secured Creditor
and their respective successors, permitted assigns, employees, agents and
servants (hereinafter in this Section 8.1 referred to individually as
"Indemnitee," and collectively as "Indemnitees") harmless from any and all
losses, liabilities, obligations, damages, injuries, penalties, claims, demands,
actions, suits, judgments and any and all reasonable costs, expenses or
disbursements (including reasonable attorneys' fees and expenses and/or costs
and expenses associated with obtaining required approvals of any Gaming
Authority) (for the purposes of this Section 8.1 the foregoing are collectively
called "expenses") of whatsoever kind and nature imposed on, asserted against or
incurred by any of the Indemnitees in any way relating to or arising out of this
Agreement, any other Secured Debt Agreement or any other document executed in
connection herewith or therewith or in any other way connected with the
administration of the transactions contemplated hereby or thereby or the
enforcement of any of the terms of, or the preservation of any rights under any
thereof, or in any way relating to or arising out of the manufacture, ownership,
ordering, purchase, delivery, control, acceptance, lease, financing, possession,
operation, condition, sale, return or other disposition, or use of the
Collateral (including, without limitation, latent or other defects, whether or
not discoverable), the violation of the laws of any country, state or other
governmental body or unit, any tort (including, without limitation, claims
arising or imposed under the doctrine of strict liability, or for or on account
of injury to or the death of any Person (including any Indemnitee), or property
damage), or contract claim; provided that no Indemnitee shall be indemnified
pursuant to this Section 8.1(a) for losses, damages or liabilities to the extent
caused by the gross negligence or willful misconduct of such Indemnitee. Each
Assignor agrees that upon written notice by any Indemnitee of the assertion of
such a liability, obligation, damage, injury, penalty, claim, demand, action,
suit or judgment, the relevant Assignor shall assume full responsibility for the
defense thereof. Each Indemnitee agrees to use its best efforts to promptly
notify the relevant Assignor of any such assertion of which such Indemnitee has
knowledge.
(b) Without limiting the application of Section 8.1(a) hereof, each
Assignor agrees, jointly and severally, to pay, or reimburse the Collateral
Agent for any and all reasonable fees, costs and expenses of whatever kind or
nature incurred in connection with the creation, preservation or protection of
the Collateral Agent's Liens on, and security interest in, the Collateral,
including, without limitation, all fees and taxes in connection with the
recording or filing of instruments and documents in public offices, payment or
discharge of any taxes or Liens upon or in respect of the Collateral, premiums
for insurance with
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respect to the Collateral and all other reasonable fees, costs and expenses in
connection with protecting, maintaining or preserving the Collateral and the
Collateral Agent's interest therein, whether through judicial proceedings or
otherwise, or in defending or prosecuting any actions, suits or proceedings
arising out of or relating to the Collateral.
(c) If and to the extent that the obligations of any Assignor under
this Section 8.1 are unenforceable for any reason, such Assignor hereby agrees
to make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
8.2. Indemnity Obligations Secured by Collateral; Survival. Any
amounts paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Obligations secured by the Collateral. The
indemnity obligations of each Assignor contained in this Article VIII shall
continue in full force and effect notwithstanding the full payment of all of the
other Obligations and notwithstanding the discharge thereof.
ARTICLE IX
DEFINITIONS
The following terms shall have the meanings herein specified. Such
definitions shall be equally applicable to the singular and plural forms of the
terms defined.
"Administrative Agent" shall have the meaning provided in the
recitals of this Agreement.
"Agreement" shall mean this Security Agreement as the same may be
modified, supplemented or amended from time to time in accordance with its
terms.
"Assignor" shall have the meaning provided in the first paragraph of
this Agreement.
"Borrowers" shall have the meaning provided in the recitals to this
Agreement.
"Cash Collateral Account" shall mean a non-interest bearing cash
collateral account maintained with, and in the sole dominion and control of, the
Collateral Agent for the benefit of the Secured Creditors.
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"Chattel Paper" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Class" shall have the meaning provided in Section 10.2 of this
Agreement.
"Collateral" shall have the meaning provided in Section 1.1(a) of
this Agreement.
"Collateral Agent" shall have the meaning provided in the first
paragraph of this Agreement.
"Contract Rights" shall mean all rights of any Assignor (including,
without limitation, all rights to payment) under each Contract.
"Contracts" shall mean all contracts between any Assignor and one or
more additional parties (including, without limitation, any Interest Rate
Protection Agreements or Other Hedging Agreements), but excluding any contract
to the extent that the terms thereof prohibit the assignment of, or granting a
security interest in, such contract (it being understood and agreed, however,
that notwithstanding the foregoing, all rights to payment for money due or to
become due pursuant to any such excluded Contract shall be subject to the
security interests created pursuant to this Agreement).
"Copyrights" shall mean any United States or foreign copyright owned
(or subject to the rights of ownership) by any Assignor, including any
registrations of any copyright, in the United States Copyright Office or the
equivalent thereof in any foreign country, as well as any application for a
copyright registration now or hereafter made with the United States Copyright
Office or the equivalent thereof in any foreign country by any Assignor.
"Credit Agreement" shall have the meaning provided in the recitals
of this Agreement.
"Credit Document Obligations" shall have the meaning provided in the
definition of "Obligations" in this Article IX.
"Default" shall mean any event which, with notice or lapse of time,
or both, would constitute an Event of Default.
"Documents" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
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"Equipment" shall mean any "equipment," as such term is defined in
the Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by any Assignor and, in any event, shall include,
but shall not be limited to, all machinery, equipment, furnishings, movable
trade fixtures and vehicles now or hereafter owned by any Assignor and any and
all additions, substitutions and replacements of any of the foregoing, wherever
located, together with all attachments, components, parts, equipment and
accessories installed thereon or affixed thereto.
"Event of Default" shall mean any Event of Default under, and as
defined in, the Credit Agreement and shall in any event, without limitation,
include any payment default on any of the Obligations after the expiration of
any applicable grace period.
"General Intangibles" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Goods" shall have the meaning provided in the Uniform Commercial
Code as in effect on the date hereof in the State of New York.
"Indemnitee" shall have the meaning provided in Section 8.1 of this
Agreement.
"Instrument" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Interest Rate Protection Agreements or Other Hedging Agreements"
shall have the meaning provided in the recitals of this Agreement.
"Inventory" shall mean merchandise, inventory and goods, and all
additions, substitutions and replacements thereof, wherever located, together
with all goods, supplies, incidentals, packaging materials, labels, materials
and any other items used or usable in manufacturing, processing, packaging or
shipping same, in all stages of production -- from raw materials through
work-in-process to finished goods -- and all products and proceeds of whatever
sort and wherever located and any portion thereof which may be returned,
rejected, reclaimed or repossessed by the Collateral Agent from any Assignor's
customers, and shall specifically include all "inventory" as such term is
defined in the Uniform Commercial Code as in effect on the date hereof in the
State of New York, now or hereafter owned by any Assignor.
"Lender Creditors" shall have the meaning provided in the recitals
of this Agreement.
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"Lenders" shall have the meaning provided in the recitals of this
Agreement.
"Liens" shall mean any security interest, mortgage, pledge, lien,
claim, charge, encumbrance, title retention agreement, lessor's interest in a
financing lease or analogous instrument, in, of, or on any Assignor's property.
"Marks" shall mean any United States or foreign trademarks, service
marks and trade names now owned, subject to a right of ownership or hereafter
acquired by any Assignor, including any registration of, or application for, any
trademarks and service marks in the United States Patent and Trademark Office or
the equivalent thereof in any foreign country, and any trade dress including
logos and/or designs used by any Assignor in the United States or any foreign
country.
"Obligations" shall mean (i) the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of all
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities of each
Assignor now existing or hereafter incurred under, arising out of or in
connection with any Credit Document to which such Assignor is a party and the
due performance and compliance by each Assignor with the terms of each such
Credit Document (all such obligations and liabilities under this clause (i),
except to the extent consisting of Other Obligations, being herein collectively
called the "Credit Document Obligations"); (ii) the full and prompt payment when
due (whether at the stated maturity, by acceleration or otherwise) of all
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities of each
Assignor now existing or hereafter incurred under, arising out of or in
connection with any Interest Rate Protection Agreement or Other Hedging
Agreement (including, without limitation, all obligations and liabilities of
such Assignor under the U.S. Subsidiaries Guaranty in respect of Interest Rate
Protection Agreements or Other Hedging Agreements) and the due performance and
compliance by such Assignor with the terms contained in each such Interest Rate
Protection Agreement or Other Hedging Agreement (all such obligations and
indebtedness under this clause (ii) being herein collectively called the "Other
Obligations"); (iii) any and all sums advanced by the Collateral Agent in order
to preserve the Collateral or preserve its security interest in the Collateral;
(iv) in the event of any proceeding for the collection or enforcement of any
obligations or liabilities referred to in clauses (i), (ii) and (iii) above,
after an Event of Default shall have occurred and be continuing, the reasonable
expenses of re-taking, holding, preparing for sale or lease, selling or
otherwise disposing of or realizing on the Collateral, or of any exercise by the
Collateral Agent of its rights hereunder, together with reasonable attorneys'
fees and court costs; and (v) all amounts paid by any Indemnitee as to which
such Indemnitee has the right to reimbursement under Section 8.1 of this
Agreement.
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"Other Creditors" shall have the meaning provided in the recitals of
this Agreement.
"Other Obligations" shall have the meaning provided in the
definition of "Obligations" in this Article IX.
"Patents" shall mean any United States or foreign patent owned,
subject to a right of ownership by or hereafter acquired by any Assignor and any
divisions, continuations, reissues, reexaminations, extensions or renewals
thereof, as well as any application for a United States or foreign patent now or
hereafter made by any Assignor or subject to a right of ownership in such
Assignor.
"Primary Obligations" shall have the meaning provided in Section
7.4(b) of this Agreement.
"Proceeds" shall have the meaning provided in the Uniform Commercial
Code as in effect in the State of New York on the date hereof or under other
relevant law and, in any event, shall include, but not be limited to, (i) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
the Collateral Agent or any Assignor from time to time with respect to any of
the Collateral, (ii) any and all payments (in any form whatsoever) made or due
and payable to any Assignor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any governmental authority (or any person acting under
color of governmental authority) and (iii) any and all other amounts from time
to time paid or payable under or in connection with any of the Collateral.
"Pro Rata Share" shall have the meaning provided in Section 7.4(b)
of this Agreement.
"Proprietary Information" means all information and know-how
worldwide, including, without limitation, technical data, manufacturing data,
research and development data, manufacturing data, research and development
data, data relating to compositions, processes and formulations, manufacturing
and production know-how and experience, management know-how, training programs,
manufacturing, engineering and other drawings, specifications, performance
criteria, operating instructions, maintenance manuals, technology, technical
information, software, engineering and computer data and databases, design and
engineering specifications, catalogs, promotional literature and financial,
business and marketing plans, inventions and invention disclosures.
"Receivables" shall mean any "account" as such term is defined in
the Uniform Commercial Code as in effect on the date hereof in the State of New
York, now
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or hereafter owned by any Assignor and, in any event, shall include, but shall
not be limited to, all of such Assignor's rights to payment for goods sold or
leased or services performed by such Assignor, whether now in existence or
arising from time to time hereafter, including, without limitation, rights
evidenced by an account, note, contract, security agreement, chattel paper or
other evidence of indebtedness or security, together with (a) all security
pledged, assigned, hypothecated or granted to or held by such Assignor to secure
the foregoing, (b) all of any Assignor's right, title and interest in and to any
goods, the sale of which gave rise thereto, (c) all guarantees, endorsements and
indemnifications on, or of, any of the foregoing, (d) all powers of attorney for
the execution of any evidence of indebtedness or security or other writing in
connection therewith, (e) all books, records, ledger cards and invoices relating
thereto, (f) all evidences of the filing of financing statements and other
statements and the registration of other instruments in connection therewith and
amendments thereto, notices to other creditors or secured parties, and
certificates from filing or other registration officers, (g) all credit
information, reports and memoranda relating thereto and (h) all other writings
related in any way to the foregoing.
"Representative" shall have the meaning provided in Section 7.4(e)
of this Agreement.
"Requisite Creditors" shall have the meaning provided in Section
10.2 of this Agreement.
"Secondary Obligations" shall have the meaning provided in Section
7.4(b) of this Agreement.
"Secured Creditors" shall have the meaning provided in the recitals
of this Agreement.
"Secured Debt Agreements" shall mean and include this Agreement, the
other Credit Documents and the Interest Rate Protection Agreements or Other
Hedging Agreements.
"Specified Default" shall have the meaning provided in Section 3.3
of this Agreement.
"Termination Date" shall have the meaning provided in Section
10.8(a) of this Agreement.
"Trade Secrets" means any secretly held existing engineering and
other data, information, production procedures and other know-how relating to
the design, manu-
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facture, assembly, installation, use, operation, marketing, sale and servicing
of any products or business of the Assignor worldwide whether written or not
written.
ARTICLE X
MISCELLANEOUS
10.1. Notices. Except as otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be deemed to have been duly given or made when delivered to the
party to which such notice, request, demand or other communication is required
or permitted to be given or made under this Agreement, addressed as follows:
(a) if to any Assignor:
6601 South Bermuda
Las Vegas, Nevada 89119
Attention: Scott Schweinfurth
Telephone No.: (702) 896-7700
Facsimile No.: (702) 263-5636
(b) if to the Collateral Agent:
Credit Suisse First Boston
Eleven Madison Avenue
New York, New York 10010
Attention: Ed Barr
Telephone No.: (212) 325-9151
Facsimile No.: (212) 325-8309
(c) if to any Lender Creditor, at such address as such Lender
Creditor shall have specified in the Credit Agreement;
(d) if to any Other Creditor, at such address as such Other Creditor
shall have specified in writing to each Assignor and the Collateral Agent;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
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10.2. Waiver; Amendment. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by each Assignor directly affected thereby (it
being understood that additional Assignors may be added as parties hereto from
time to time in accordance with Section 10.11, and that no consent of any other
Assignor or of the Required Lenders shall be required in connection therewith)
and the Collateral Agent (with the consent of (x) either the Required Lenders
(or, to the extent required by Section 13.12 of the Credit Agreement, all of the
Lenders) at all times prior to the time at which all Credit Document Obligations
have been paid in full or (y) the holders of at least a majority of the
outstanding Other Obligations at all times after the time on which all Credit
Document Obligations have been paid in full); provided, that any change, waiver,
modification or variance affecting the rights and benefits of a single Class of
Secured Creditors (and not all Secured Creditors in a like or similar manner)
shall require the written consent of the Requisite Creditors of such Class of
Secured Creditors. For the purpose of this Agreement the term "Class" shall mean
each class of Secured Creditors, i.e., whether (x) the Lender Creditors as
holders of the Credit Document Obligations or (y) the Other Creditors as the
holders of the Other Obligations. For the purpose of this Agreement, the term
"Requisite Creditors" of any Class shall mean each of (x) with respect to the
Credit Document Obligations, the Required Lenders and (y) with respect to the
Interest Rate Protection Obligations, the holders of at least a majority of all
obligations outstanding from time to time under the Interest Rate Protection
Agreements or Other Hedging Agreements.
10.3. Obligations Absolute. The obligations of each Assignor
hereunder shall remain in full force and effect without regard to, and shall not
be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of such Assignor; (b) any
exercise or non-exercise, or any waiver of, any right, remedy, power or
privilege under or in respect of this Agreement or any other Secured Debt
Agreement; or (c) any amendment to or modification of any Secured Debt Agreement
or any security for any of the Obligations; whether or not any Assignor shall
have notice or knowledge of any of the foregoing.
10.4. Successors and Assigns. This Agreement shall be binding upon
each Assignor and its successors and assigns and shall inure to the benefit of
the Collateral Agent and the Secured Creditors and their respective successors
and assigns. All agreements, statements, representations and warranties made by
each Assignor herein or in any certificate or other instrument delivered by such
Assignor or on its behalf under this Agreement shall be considered to have been
relied upon by the Secured Creditors and shall survive the execution and
delivery of this Agreement and the other Secured Debt Agreements regardless of
any investigation made by the Secured Creditors or on their behalf.
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10.5. Headings Descriptive. The headings of the several sections of
this Agreement are inserted for convenience only and shall not in any way affect
the meaning or construction of any provision of this Agreement.
10.6. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED
BY THE LAW OF THE STATE OF NEW YORK AND APPLICABLE GAMING REGULATIONS (WITHOUT
REGARD TO PRINCIPLES OF CONFLICT OF LAWS).
10.7. Assignor's Duties. It is expressly agreed, anything herein
contained to the contrary notwithstanding, that each Assignor shall remain
liable to perform all of the obligations, if any, assumed by it with respect to
the Collateral and the Collateral Agent shall not have any obligations or
liabilities with respect to any Collateral by reason of or arising out of this
Agreement, nor shall the Collateral Agent be required or obligated in any manner
to perform or fulfill any of the obligations of each Assignor under or with
respect to any Collateral.
10.8. Termination; Release. (a) After the Termination Date, this
Agreement shall terminate (provided that all indemnities set forth herein
including, without limitation, in Section 8.1 hereof shall survive such
termination) and the Collateral Agent, at the request and expense of the
respective Assignor, will promptly execute and deliver to such Assignor a proper
instrument or instruments (including Uniform Commercial Code termination
statements on form UCC-3) acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to such Assignor (without
recourse and without any representation or warranty) such of the Collateral as
may be in the possession of the Collateral Agent and as has not theretofore been
sold or otherwise applied or released pursuant to this Agreement. As used in
this Agreement, "Termination Date" shall mean the date upon which the Total
Commitments, and all Interest Rate Protection Agreements or Other Hedging
Agreements have been terminated, no Note is outstanding (and all Loans have been
repaid in full), all Letters of Credit have been terminated and all other
Obligations then due and payable have been indefeasibly paid in full.
(b) In the event that any part of the Collateral is sold (but not to
the U.S. Borrower or a Subsidiary thereof) in connection with a sale permitted
by Section 9.02 of the Credit Agreement or is otherwise released at the
direction of the Required Lenders (or all the Lenders if required by Section
13.12 of the Credit Agreement), the Collateral Agent, at the request and expense
of such Assignor, will duly assign, transfer and deliver to such Assignor
(without recourse and without any representation or warranty) such of the
Collateral as is then being (or has been) so sold or released and as may be in
the possession
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of the Collateral Agent and has not been theretofore been released pursuant to
this Agreement.
(c) At any time that the respective Assignor desires that the
Collateral be released as provided in the foregoing Section 10.8(a) or (b), it
shall deliver to the Collateral Agent a certificate signed by an Authorized
Officer of such Assignor stating that the release of the respective Collateral
is permitted pursuant to Section 10.8(a) or (b) hereof.
(d) In the event an Assignor which is a Subsidiary of the U.S.
Borrower party to the U.S. Subsidiaries Guaranty is released from its Guaranty
under the U.S. Subsidiaries Guaranty, such Assignor shall be released from this
Agreement and this Agreement shall, as to such Assignor only, have no further
force or effect.
10.9. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the U.S. Borrower and
the Collateral Agent.
10.10. Limitation by Law; Severability. 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 Applicable Gaming
Regulations, and all the provisions of this Agreement are intended to be subject
to all applicable mandatory provisions of the Applicable Gaming Regulations
which may be controlling and to be limited to extent necessary so that they will
not render this Agreement invalid or unenforceable, in whole or in part.
10.11. The Collateral Agent. The Collateral Agent will hold in
accordance with this Agreement all items of the Collateral at any time received
under this Agreement. It is expressly understood and agreed that the obligations
of the Collateral Agent as holder of the Collateral and interests therein and
with respect to the disposition thereof, and otherwise under this Agreement, are
only those expressly set forth in this Agreement. The Collateral Agent shall act
hereunder on the terms and conditions set forth in this Agreement and in Section
12 of the Credit Agreement.
10.12. Additional Assignors. It is understood and agreed to that any
Subsidiary of the U.S. Borrower that is required to execute a counterpart of
this Agreement after the date hereof pursuant to the Credit Agreement shall
automatically become an Assignor hereunder by executing a counterpart hereof and
delivering the same to the Collateral Agent.
<PAGE> 366
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their duly authorized officers as of the date first
above written.
ALLIANCE GAMING CORPORATION,
as an Assignor
By /s/ Scott Schweinfurth
------------------------------
Title: Senior Vice President,
CFO and Treasurer
ALLIANCE HOLDING COMPANY,
as an Assignor
By /s/ Scott Schweinfurth
------------------------------
Title: Treasurer
UNITED COIN MACHINE CO.,
as an Assignor
By /s/ Scott Schweinfurth
------------------------------
Title: Treasurer
PLANTATION INVESTMENTS, INC.,
as an Assignor
By /s/ Scott Schweinfurth
------------------------------
Title: Treasurer
APT GAMES, INC.,
as an Assignor
By /s/ Scott Schweinfurth
------------------------------
Title: Treasurer
<PAGE> 367
FOREIGN GAMING VENTURES, INC.,
as an Assignor
By /s/ Scott Schweinfurth
------------------------------
Title: Treasurer
louisiana VENTURES, INC.,
as an Assignor
By /s/ Scott Schweinfurth
------------------------------
Title: Treasurer
UNITED GAMING RAINBOW,
as an Assignor
By /s/ Scott Schweinfurth
------------------------------
Title: Treasurer
NATIVE AMERICAN INVESTMENT,
INC., as an Assignor
By /s/ Scott Schweinfurth
------------------------------
Title: Treasurer
BALLY GAMING INTERNATIONAL,
INC., as an Assignor
By /s/ Scott Schweinfurth
------------------------------
Title: Treasurer
<PAGE> 368
BALLY GAMING, INC.,
as an Assignor
By /s/ Scott Schweinfurth
------------------------------
Title: Treasurer
Accepted and Agreed to:
CREDIT SUISSE FIRST BOSTON,
as Administrative Agent
By /s/ Sean S. Bernard
---------------------------------
Title: Assistant Vice President
By /s/ Edward E. Barr
---------------------------------
Title: Associate
<PAGE> 369
ANNEX G to
SECURITY AGREEMENT
ASSIGNMENT OF SECURITY INTEREST
IN UNITED STATES TRADEMARKS AND PATENTS
FOR GOOD AND VALUABLE CONSIDERATION, receipt and sufficiency of
which are hereby acknowledged, [Name of Assignor], a __________ [corporation]
[partnership] ("the Assignor") with principal offices at
____________________________, hereby assigns and grants to Credit Suisse First
Boston, as Collateral Agent, with principal offices at Eleven Madison Avenue,
New York, New York 10010 (the "Assignee"), a security interest in (i) all of the
Assignor's right, title and interest in and to the United States trademarks,
trademark registrations and trademark applications (the "Marks") set forth on
Schedule A attached hereto, (ii) all of the Assignor's rights, title and
interest in and to the United States patents and patent applications (the
"Patents") set forth on Schedule B attached, in each case together with (iii)
all Proceeds (as such term is defined in the Security Agreement referred to
below) and products of the Marks and Patents, (iv) the goodwill of the
businesses with which the Marks are associated and (v) all causes of action
arising prior to or after the date hereof for infringement of any of the Marks
and Patents or unfair competition regarding the same.
THIS ASSIGNMENT is made to secure the satisfactory performance and
payment of all the Obligations of the Assignor, as such term is defined in the
Security Agreement among the Assignor, the other assignors from time to time
party thereto and the Assignee, dated as of August 8, 1997 (as amended from time
to time, the "Security Agreement"). Upon the occurrence of the Termination Date
(as defined in the Security Agreement), the Assignee shall, upon such
satisfaction and upon the request and at the expense of the Assignor, promptly
execute, acknowledge, and deliver to the Assignor an instrument in writing
releasing the security interest in the Marks and Patents acquired under this
Assignment.
<PAGE> 370
ANNEX G
Page 2
This Assignment has been granted in conjunction with the security
interest granted to the Assignee under the Security Agreement. The rights and
remedies of the Assignee with respect to the security interest granted herein
are without prejudice to, and are in addition to those set forth in the Security
Agreement, all terms and provisions of which are incorporated herein by
reference. In the event that any provisions of this Assignment are deemed to
conflict with the Security Agreement, the provisions of the Security Agreement
shall govern.
<PAGE> 371
ANNEX G
Page 3
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the ____ day of _________, ___.
[NAME OF ASSIGNOR], Assignor
By
------------------------------------
Name:
Title:
CREDIT SUISSE FIRST BOSTON, as
Collateral Agent, Assignee
By
------------------------------------
Name:
Title:
By
------------------------------------
Name:
Title:
<PAGE> 372
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of _________, ___, before me personally came
________ _________________ who, being by me duly sworn, did state as follows:
that [s]he is _______________ of [Name of Assignor], that [s]he is authorized to
execute the foregoing Assignment on behalf of said [corporation] [partnership]
and that [s]he did so by authority of the Board of Directors of said
[corporation] [partnership].
-----------------------------------------
Notary Public
<PAGE> 373
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of _________, ____, before me personally came
________ _____________________ who, being by me duly sworn, did state as
follows: that [s]he is __________________ of Credit Suisse First Boston, that
[s]he is authorized to execute the foregoing Assignment on behalf of said
corporation and that [s]he did so by authority of the Board of Directors of said
corporation.
-----------------------------------------
Notary Public
<PAGE> 374
ANNEX H to
SECURITY AGREEMENT
ASSIGNMENT OF SECURITY INTEREST
IN UNITED STATES COPYRIGHTS
WHEREAS, [Name of Assignor], a _______________ [corporation]
[partnership] (the "Assignor"), having its chief executive office at
__________________________________, ____________________________, is the owner
of all right, title and interest in and to the United States copyrights and
associated United States copyright registrations and applications for
registration set forth in Schedule A attached hereto;
WHEREAS, CREDIT SUISSE FIRST BOSTON, as Collateral Agent, having its
principal offices at Eleven Madison Avenue, New York, New York 10010 (the
"Assignee"), desires to acquire a security interest in said copyrights and
copyright registrations and applications therefor; and
WHEREAS, the Assignor is willing to assign to the Assignee, and to
grant to the Assignee a security interest in and lien upon the copyrights and
copyright registrations and applications therefor described above.
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and subject to the terms and conditions of the
Security Agreement, dated as of August 8, 1997, made by the Assignor, the other
assignors from time to time party thereto and the Assignee (as amended from time
to time, the "Security Agreement"), the Assignor hereby assigns to the Assignee,
and grants to the Assignee a security interest in the copyrights and copyright
registrations and applications therefor set forth in Schedule A attached hereto.
This Assignment is made to secure the satisfactory performance and
payment of all the Obligations (as defined in the Security Agreement) of the
Assignor. Upon the occurrence of the Termination Date (as defined in the
Security Agreement), the Assignee shall, upon such satisfaction and upon the
request and at the expense of the Assignor, promptly execute, acknowledge and
deliver to the Assignor an instrument in writing releasing the security interest
in the Copyrights acquired under this Assignment.
This Assignment has been granted in conjunction with the security
interest granted to the Assignee under the Security Agreement. The rights and
remedies of the Assignee with respect to the security interest granted herein
are without prejudice to, and are in addition to those set forth in the Security
Agreement, all terms and provisions of which are incorporated herein by
reference. In the event that any provisions of this Assignment are deemed to
conflict with the Security Agreement, the provisions of the Security Agreement
shall govern.
<PAGE> 375
ANNEX H
Page 2
Executed at New York, New York, the __ day of _________, ____.
[NAME OF ASSIGNOR]
By
------------------------------------
Name:
Title:
CREDIT SUISSE FIRST BOSTON
By
------------------------------------
Name:
Title:
By
------------------------------------
Name:
Title:
<PAGE> 376
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this __ day of _________, ____, before me personally came
___________ _______________, who being duly sworn, did depose and say that [s]he
is ___________________ of [Name of Assignor], that [s]he is authorized to
execute the foregoing Assignment on behalf of said [corporation] [partnership]
and that [s]he did so by authority of the Board of Directors of said
corporation.
-----------------------------------------
Notary Public
<PAGE> 377
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of _________, ____, before me personally came
________ _____________________ who, being by me duly sworn, did state as
follows: that [s]he is __________________ of Credit Suisse First Boston, that
[s]he is authorized to execute the foregoing Assignment on behalf of said
corporation and that [s]he did so by authority of the Board of Directors of said
corporation.
-----------------------------------------
Notary Public
<PAGE> 378
EXHIBIT K
<PAGE> 379
EXHIBIT K
GERMAN SECURITY AGREEMENT
By and among
(1) Alliance Automaten Verwaltungs GmbH, a limited liability company
established under the laws of Germany, registered with the commercial
register of the Amtsgericht Charlottenburg No. HR B B 58120,
Maybachufer 48-51, 12045 Berlin, Germany,
(2) Alliance Automaten GmbH & Co KG, a company established under the laws
of Germany, registered with the commercial register of the Amtsgericht
Charlottenburg under No. HR A 27571, Maybachufer 48-51, 12045 Berlin,
Germany,
(3) Bally Wulff Vertriebs GmbH, a limited liability company established
under the laws of Germany, registered with the commercial register of
the Amtsgericht Hannover under HR B 6421, Sokelantstr. 35, 30165
Hannover, Germany,
(4) Geda Automatengro#handel Gesellschaft mit beschrankter Haftung, a
limited liability company established under the laws of Germany,
registered with the commercial register of the Amtsgericht Bruchsal
under HR B 0535, An der B 35, 76646 Bruchsal, Germany,
(5) Erkens Vertriebs GmbH, a limited liability company established under
the laws of Germany, registered with the commercial register of the
Amtsgericht Mettmann under HR B 2844, Heinrich-Hertz-Str. 36, 40699
Erkrath, Germany,
(6) WESTAV Westdeutscher Automatenvertrieb GmbH, a limited liability
company established under the laws of Germany, registered with the
commercial register of the Amtsgericht Hannover under HR B 2000,
(7) Bally Gaming International GmbH, a limited liability company
established under the laws of Germany, registered with the commercial
register of the Amtsgericht Hannover under HR B 50491,
<PAGE> 380
EXHIBIT K
Page 2
represented by the undersigned
- hereinafter collectively the "Assignors", individually the "Assignor" -
and
Credit Suisse First Boston, a company established under the
laws of Switzerland and certified as a bank, acting through
its New York Branch and as collateral agent for the Lender
Creditors (as defined below),
represented by the undersigned
- hereinafter "Collateral Agent" -
Except as otherwise defined herein, terms used and defined in the Credit
Agreement (as defined below) shall be used herein as therein defined.
WHEREAS, (i) Alliance Gaming Corporation, Las Vegas, USA (the "US
Borrower"), (ii) Bally Wulff Vertriebs GmbH, Hannover, Germany (hereinafter the
"Bally Wulff Vertrieb"), (iii) Bally Wulff Automaten GmbH, Berlin, Germany
(hereinafter the "Bally Wulff Automaten") (Bally Wulff Vertrieb and Bally Wulff
Automaten the "German Borrowers", the plural form including the singular; the
US Borrower and the German Borrowers together the "Borrowers"), the financial
institutions from time to time party thereto (the "Lenders") and the Collateral
Agent as Administrative Agent (together with the Lenders, the "Lender
Creditors"), have entered into a credit agreement, dated as of August 8, 1997
(as amended, modified or supplemented from time to time, the "Credit
Agreement");
WHEREAS, in the Credit Agreement the Lender Creditors, among others,
severally agreed to grant to the German Borrowers Revolving Loans up to the
amount of $55,000,000 (taking the Deutsche equivalent thereof) (the "Loans"),
including the issuance of Letters of Credit (the "German Letters of Credit");
WHEREAS, the German Borrowers may enter into Interest Rate Protection
Agreements and/or Hedging Agreements with one or all of the Lender Creditors or
any affiliate thereof (hereinafter the "Other Creditors", and together with the
Lender Creditors the "Creditors") (hereinafter the "Additional Agreements");
<PAGE> 381
EXHIBIT K
Page 3
WHEREAS, pursuant to the German Subsidiaries Guaranty, dated as of
August 8, 1997 (as amended, modified or supplemented from time to time, the
"German Subsidiaries Guaranty"), each Assignor (other than the German
Borrowers) has jointly and severally guaranteed to the Creditors the payment
when due of the Guaranteed Obligations (as defined in the German Subsidiaries
Guaranty) (in such capacity the "Guarantors");
WHEREAS, it is a condition precedent to the making of Loans and the
issuance of, and participation in, German Letters of Credit under the Credit
Agreement and the entering into of Additional Agreements that each Assignor
shall have executed and delivered to the Collateral Agent this Agreement in
order to secure the obligations of the German Borrowers under the Credit
Agreement and the Additional Agreements and of the Guarantors under the German
Subsidiaries Guaranty;
WHEREAS, each Assignor will obtain benefits from the incurrence of the
Loans by, and the issuance of German Letters of Credit to, the German Borrowers
under the Credit Agreement and from the entering into of Additional Agreements
and, accordingly, desires to execute this Security Agreement in order to
satisfy the conditions described in the preceding paragraph and to induce the
Lenders to make Loans to, and to issue and participate in Letters of Credit for
the account of the German Borrowers and to enter into Additional Agreements;
NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to each Assignor, the receipt and sufficiency of which are hereby
acknowledged, each Assignor hereby makes the following representations and
warranties and hereby covenants and agrees with the Collateral Agent as
follows:
Section 1
SECURITY INTERESTS
(1) As security for the prompt and complete payment and performance when
due (whether at the stated maturity, by acceleration, at the
occurrence of an Event of Default or otherwise) of:
(a) in the case of either German Borrower:
(i) the principal of and interest on the Loans made to the
German Borrowers under the Credit Agreement and all
reimbursemen obligations and Unpaid Drawings with respect to
German Letters of Credit issued under the Credit Agreement,
<PAGE> 382
EXHIBIT K
Page 4
(ii) all other obligations and liabilities owing by the German
Borrowers to the Lender Creditors under the Credit Agreement
(including, without limitation, indemnities, Fees and interest
thereon) now existing or hereafter incurred under, arising out
of or in connection with the Credit Agreement or any other
Credit Document and the due performance and compliance with
the terms of the Credit Documents by the German Borrowers (all
such principal, interest, liabilities and obligations
hereinafter the "Credit Document Obligations"),
(iii) all obligations and liabilities of the German Borrowers
now existing or hereafter incurred under, arising out of or in
connection with any Additional Agreement and the due
performance and compliance by the German Borrowers with the
terms contained in each Additional Agreement (all such
obligations and indebtedness under this clause (iii) being
herein collectively called the "Other Obligations");
(b) in the case of any Assignor other than the German Borrowers all
the obligations and liabilities of the Guarantor under the German
Subsidiaries Guaranty (all such obligations hereinafter the "Guaranty
Obligations");
(c) in the case of Bally Gaming International GmbH, all of the
obligations of Bally Gaming International GmbH pursuant to the Bally
Gaming International Senior Secured Loans;
(d) in the case of each Assignor:
(i) any and all sums advanced by the Collateral Agent in order
to preserve the Collateral or preserve the security interests
in the Collateral,
(ii) in an Event of Default the reasonable expenses of
re-taking, holding, preparing for sale or lease, selling or
otherwise disposing of or realizing on the Collateral, or of
any exercise by the Collateral Agent of its rights hereunder,
together with reasonable attorneys' fees and court costs, and
(iii) all amounts paid by any Indemnitee (as defined in
Section 10(1)) of this Agreement as to which such Indemnitee
has the right to reimbursement under Section 10 of this
Agreement;
the respective Assignor does hereby
<PAGE> 383
EXHIBIT K
Page 5
1. assign and transfer unto the Collateral Agent, and does hereby
grant to the Collateral Agent for the benefit of the Creditors a
continuing security interest of first priority in, all of the
right, title and interest (including any expectancy right)
("Anwartschaftsrecht") of such Assignor in, to and under all of
the Collateral, and
2. pledge to the Lender Creditors all Intellectual Property Rights
of which the assignment and/or the transfer is excluded by
mandatory provisions of the applicable law.
(2) In addition, Bally Wulff Vertriebs and/or Bally Wulff Automaten hereby
assigns all claims arising from any future intercompany loans to Bally
Gaming International GmbH, including, but not limited to, all rights
or title to any note evidencing these claims. Each of Bally Wulff
Vertriebs and Bally Wulff Automaten hereby warrant that such loan
shall not have an equity substituting character
(eigenkapitalesetzendes Darlehen). Bally Wulff Vertriebs and/or Bally
Wulff Automaten further undertake(s) to assign, transfer or pledge, as
the case may be, to the Collateral Agent any collateral or security
granted by Bally Gaming International to Bally Wulff Vertriebs.
(3) In case the Credit Agreement should be void, the Collateral shall
secure any obligation of the German Borrowers to the Creditors created
by applicable law, including, but without limitation, the repayment of
Loans already paid out to the German Borrowers (those obligations
together with the obligations as described in the foregoing paragraph
(1) under (a) to (d) the "Secured Obligations").
(4) The security interest of the Collateral Agent under this Agreement
extends to all Collateral of the kind which is the subject of this
Agreement which any Assignor may acquire at any time during the
continuation of this Agreement.
(5) If at any time the aggregate amount of the realizable value of the
Collateral and of any other rights and assets that constitute
collateral for the Secured Obligations exceeds 120% (the "Coverage
Amount") of the Secured Obligations and that not only on a temporary
basis, the Collateral Agent shall, upon the written request of the
Assignors and at the expense of the Assignors, but without undue
delay, (i) reassign or retransfer such Collateral or collateral or
such right
<PAGE> 384
EXHIBIT K
Page 6
or asset (to be selected by the Collateral Agent and the Lenders at
their discretion) to the respective Assignor, as necessary to reduce
such aggregate amount to the Coverage Amount, and (ii) if such
aggregate amount thereafter still exceeds the Coverage Amount,
reassign or retransfer, as the case may be, to the respective Assignor
such part of the Collateral, collateral or of such right or asset (to
be selected by the Collateral Agent and the Creditors in their
discretion), together with all related rights and assets, as is
necessary to reduce such aggregate amount to the Coverage Amount.
(6) If and to the extent the value of the Collateral exceeds 80% of the
value of the total assets (in the meaning of Section 419 German Civil
Code) of one or several of the Assignors, the Collateral Agent shall
release to the respective Assignor an amount equal to such excess.
The Assignors undertake to keep the Collateral Agent informed of the
value of the Collateral and the value of each Assignor's total assets.
If at any time after signing this Agreement Collateral might come into
existence which would be assigned or transferred to the Collateral
Agent under this Agreement and which would make the Collateral Agent
acquire in the aggregate more than 80% of the assets of one or several
of the Assignors (taking into account also any other securities the
respective Assignor granted to the Creditors in the Credit Documents,
to the extent this is necessary to avoid the applicability of Section
419 BGB), the respective Assignor shall inform the Collateral Agent in
writing prior to the respective Collateral coming into existence and
in such written communication specifically identify such Collateral
and such Collateral shall not be assigned or transferred to the
Collateral Agent and the Creditors under this Agreement.
(7) The Collateral Agent shall have no liability whatsoever to any
Creditor as the result of any release of Collateral by it as permitted
by the foregoing paragraphs (4) and (5). Upon any release of
Collateral pursuant to the foregoing paragraphs (4) and (5), none of
the Creditors shall have any continuing right or interest in such
Collateral or the proceeds thereof.
(8) If, after the date hereof, the adoption of any applicable law, rule or
regulation, or any change therein, or any change in the interpretation
or administration thereof, shall have any effect on the validity or
enforceability of this Agreement or of the Security Interests created
hereunder (including, without limitation, with respect to its priority
rank), the Assignors shall, to the extent permitted by then applicable
law, at their expense, execute, acknowledge and deliver all such
further instruments and documents (including, without limitation,
pledge agreements, security agreements, legal opinions and related
documents), and take all such action as the Collateral Agent may from
time to time request in order to provide the Collateral Agent with a
legal position at least equal to the position it enjoyed under this
Agreement before such adoption or change.
(9) The total amount collectable by the Creditors hereunder from those
Assignors which are subsidiaries of Alliance Automaten GmbH & Co. KG,
Berlin, (i) shall
<PAGE> 385
EXHIBIT K
Page 7
not exceed the total amount of free reserves plus profits carried
forward of this company, and (ii) will meet the restrictions of
Section Section 30, 31 of the German Act on Limited Liability
Companies.
Section 2
POWER OF ATTORNEY
Each Assignor hereby constitutes and appoints the Collateral Agent its
true and lawful attorney, irrevocably, with full power after the occurrence of
and during the continuance of an Event of Default (in the name of such Assignor
or otherwise) to act, require, demand, receive, compound and give acquittance
for any and all monies and claims for monies due or to become due to the
Assignor under or arising out of the Collateral, to endorse any checks or other
instruments or orders in connection therewith and to file any claims or take
any action or institute any proceedings which the Collateral Agent may deem to
be necessary or advisable in the premises, which appointment as attorney is
coupled with an interest.
Section 3
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Assignor represents, warrants and covenants, which
representations, warranties and covenants shall survive execution and delivery
of this Agreement, as follows:
(1) All filings, registrations and recordings necessary to create,
preserve, protect and perfect the security interest granted by such
Assignor to the Collateral Agent hereby in respect of the Collateral
have been accomplished and the security interest granted to the
Collateral Agent pursuant to this Agreement in and to the Collateral
constitutes a perfected security interest therein superior and prior
to the rights of all other Persons therein and subject to no other
Liens (other than Liens permitted by Section 9.01 of the Credit
Agreement) and is entitled to all the rights, priorities and benefits
afforded by applicable law as enacted in any relevant jurisdiction to
perfected security interests.
(2) Each Assignor is, and as to Collateral acquired by it from time to
time after the date hereof such Assignor will be, the owner of all
Collateral free from any Lien, security interest encumbrance or other
right, title or interest of any Person (other than statutory liens and
retentions of title incurred in the ordinary course of business), and
such Assignor shall defend the Collateral against all claims and
<PAGE> 386
EXHIBIT K
Page 8
demands of all Persons at any time claiming the same or any interest
therein adverse to the Collateral Agent.
(3) The chief executive office of each Assignor is located at the address
indicated on ANNEX A hereto. No Assignor will move its chief
executive office except to such new location as such Assignor may
establish in accordance with the last sentence of this Section 3,
paragraph 3. The originals of all documents evidencing all
Receivables of such Assignor and the only original books of account
and records of such Assignor relating thereto are, and will continue
to be, kept at such chief executive office, or at such new locations
as such Assignor may establish in accordance with the last sentence of
this Section 3, paragraph 3. All Receivables of such Assignor are,
and will continue to be, maintained at, and controlled and directed
(including, without limitation, for general accounting purposes) from,
the office locations described above, or such new locations as such
Assignor may establish in accordance with the last sentence of this
Section 3, paragraph 3. No Assignor shall establish new locations for
such offices until (i) it shall have given to the Collateral Agent not
less than 30 days' prior written notice (or such lesser notice as
shall be acceptable to the Collateral Agent in the case of a new
record location to be established in connection with newly acquired
Contracts) of its intention so to do, clearly describing such new
location and providing such other information in connection therewith
as the Collateral Agent may reasonably request, and (ii) with respect
to such new location, it shall have taken all action, satisfactory to
the Collateral Agent, to maintain the security interest of the
Collateral Agent in the Collateral intended to be granted hereby at
all times fully perfected and in full force and effect. The Assignors
shall not change their corporate seat or chief executive office into a
jurisdiction other than the Federal Republic of Germany without the
expressly given prior written consent of the Collateral Agent.
(4) All Inventory and Equipment held on the date hereof by each Assignor
is located at one of the locations shown on ANNEX B attached hereto.
Each Assignor agrees that all Inventory and Equipment now held or
subsequently acquired by it shall be kept at (or shall be in transport
to or from) any one of the locations shown on ANNEX B hereto, or such
new location as such Assignor may establish in accordance with the
last sentence of this Section 3, paragraph 4. An Assignor may
establish a new location for Inventory and Equipment only if (i) it
shall have given to the Collateral Agent prior written notice of its
intention so to do, clearly describing such new location and providing
such other information in connection therewith as the Collateral Agent
may reasonably request, and (ii) with respect to such new location, it
shall have taken all action
<PAGE> 387
EXHIBIT K
Page 9
reasonably satisfactory to the Collateral Agent to maintain the
security interest of the Collateral Agent in the Collateral intended
to be granted hereby at all times fully perfected and in full force
and effect.
(5) No Assignor does have or operate in any jurisdiction under, or in the
preceding five years has had or has operated in any jurisdiction
under, any trade names, fictitious names or other names (including,
without limitation, any names of divisions or operations) except its
legal name. No Assignor shall change its legal name or assume or
operate in any jurisdiction under any trade, fictitious or other name
except in accordance with the last sentence of paragraph 5. No
Assignor shall assume or operate in any jurisdiction under any new
trade, fictitious or other name or operate under any existing name in
any additional jurisdiction until (i) it shall have given to the
Collateral Agent not less than 30 days' prior written notice of its
intention so to do, clearly describing such new name and/or
jurisdiction and, in the case of a new name, the jurisdictions in
which such new name shall be used and providing such other information
in connection therewith as the Collateral Agent may reasonably
request, and (ii) with respect to such new name and/or new
jurisdiction, it shall have taken all action to maintain the security
interest of the Collateral Agent in the Collateral intended to be
granted hereby at all times fully perfected and in full force and
effect.
(6) This Agreement is made with full recourse to the relevant Assignor and
pursuant to and upon all the warranties, representations, covenants
and agreements on the part of such Assignor contained herein and
otherwise in writing in connection herewith or therewith.
Section 4
SPECIAL PROVISIONS CONCERNING RECEIVABLES
(1) The assignment of the Receivables existent at the present time shall
become effective upon the conclusion of this Agreement, whereas the
assignment of all claims arising in the future shall become effective
at the time of their accrual. Each such assignment takes effect
without further action on the part of the parties or any other person.
(2) The realizable value of the Receivables corresponds to the nominal
value of the Receivables, less such claims (i) for which the
assignment is excluded or is dependent upon the assent of the third
party debtor which assent is not available, (ii) which are subject to
a customarily extended retention of title, (iii) which are
<PAGE> 388
EXHIBIT K
Page 10
confronted with claims which can be set off, (iv) for which there is
no legal validity of the assignment in due of the seat of the third
party debtor being abroad or due to the application of a foreign law,
or (v) which do not exist because the deliveries and performances
which form the basis of the claim were not performed or not to the
full extent. The realizable value of these claims is their book value
according to German GAAP. In cases of doubt regarding the realizable
value the Collateral Agent is entitled to reassign the relevant
Receivables back to the respective Assignor.
(3) If and to the extent that the Assignors may now or hereafter demand
from a third party (i) reassignment of Receivables, assigned to such
third party under an "extended retention of title" arrangement
("verlangerter Eigentumsvorbehalt"), (ii) or surrender of any proceeds
obtained therefrom, the Assignors hereby assign such rights (including
all ancillary rights) to the Collateral Agent. The same applies to
any claim of the Assignors for the reassignment ("Anwartschaftsrecht")
of a Receivable that has been assigned subject to the condition
subsequent ("auflosende Bedingung") of the automatic reversal of the
assignment in certain specified circumstances. The Collateral Agent
is entitled to terminate the "extended retention of title" arrangement
with respect to a Receivable at any time by satisfying the third
party.
(4) If any amount payable under or in connection with any of the
Receivables is or becomes evidenced by any promissory note or other
instrument (such as a check or a bill of exchange) or is or will be
paid by letter of credit, title to, and all rights with respect to,
such note or instrument or rights under a bill of exchange or letter
of credit or other note or instrument are hereby transferred and
assigned to the Collateral Agent, and possession of such note or
instrument is from the beginning held by the Assignors on behalf of
the Collateral Agent ("Besitzkonstitut") without compensation. Such
note or instrument shall be delivered to the Collateral Agent without
undue delay, duly endorsed in a manner satisfactory to the Collateral
Agent. If the Assignors do not obtain possession, they hereby assign
their rights for possession against third parties to the Collateral
Agent which accepts such assignment.
(5) The assignment does not extend to Receivables, for which the
assignment is excluded, unless and to the extent permitted under
Section 354a HGB (German Commercial Code).
(6) If, by virtue of this agreement, a Receivable relating to goods sold
to the Assignors by third parties under "extended retention of title"
arrangements ("verlangerter Eigentumsvorbehalt") is assigned to the
Collateral Agent, such
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assignment shall become effective only upon termination of the
"extended retention of title" arrangement. If the third party's claim
covers only a part of the Receivable, only such part of the Receivable
as is not covered by the third party's claim is initially assigned to
the Collateral Agent; the assignment of the remainder of the
Receivable to the Collateral Agent shall become effective only upon
termination of the "extended retention of title" arrangement. The
Collateral Agent is entitled to terminate the "extended retention of
title" arrangement with respect to a Receivable at any time by
satisfying the third party.
(7) As of the time when each of its Receivables arises, each Assignor
shall be deemed to have represented and warranted that such
Receivable, and all records, papers and documents relating thereto (if
any) are, to the best knowledge of the Assignor after due inquiry,
genuine and in all respects what they purport to be, and that all
papers and documents (if any) relating thereto, to the best knowledge
of the Assignor after due inquiry (i) will represent the genuine,
legally valid and binding obligation of the account debtor, subject to
adjustments customary in the business of such Assignor, and evidencing
indebtedness unpaid and owed by the respective account debtor arising
out of the performance of labor or services or the sale or lease and
delivery of the merchandise listed therein, or both, (ii) will be the
only original writings evidencing and embodying such obligation of the
account debtor named therein (other than copies created for general
accounting purposes), (iii) will evidence true and valid obligations,
enforceable in accordance with their respective terms, subject to
adjustments customary in the business of such Assignor, and (iv) will
be in compliance and will conform in all material respects with all
applicable laws of any relevant jurisdiction.
(8) Each Assignor will keep and maintain at its own cost and expense
satisfactory and complete records of its Receivables, including, but
not limited to, the originals of all documentation (including each
contract) with respect thereto, records of all payments received, all
credits granted thereon, all merchandise returned and all other
dealings therewith, and such Assignor will make the same available to
the Collateral Agent for inspection, at such Assignor's own cost and
expense, at any and all reasonable times upon demand and upon
reasonable advance notice. Each Assignor shall, at its own cost and
expense, deliver all tangible evidence of its Receivables (including,
without limitation, copies of all documents evidencing the
Receivables, such copies, if requested by the Collateral Agent while
an Event of Default is in existence, to be certified as true and
complete by an appropriate officer of such Assignor) and such books
and records to the Collateral Agent or to its representatives (copies
of which
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evidence and books and records may be retained by such Assignor) at
any time upon its demand. If the Collateral Agent so directs while an
Event of Default is in existence, each Assignor shall legend in form
and manner reasonably satisfactory to the Collateral Agent, the
Receivables, as well as books, records and documents of such Assignor
evidencing or pertaining to the Receivables with an appropriate
reference to the fact that the Receivables have been assigned to the
Collateral Agent and that the Collateral Agent has a security interest
therein.
(9) No Assignor shall rescind or cancel any indebtedness evidenced by any
Receivable, or modify any term thereof or make any adjustment with
respect thereto, or extend or renew the same, or compromise or settle
any material dispute, claim, suit or legal proceeding relating
thereto, or sell any Receivable, or interest therein, without the
prior written consent of the Collateral Agent, except as permitted by
paragraph 9 hereof, and so long as no Event of Default is then in
existence in respect of which the Collateral Agent has given notice
that this exception is no longer applicable, the Assignor may rescind,
cancel, modify, make adjustments with respect to, extend or renew any
indebtedness evidenced by any Receivable, or compromise or settle any
such dispute, claim, suit, or legal proceeding, or sell any Receivable
or interest therein, in the ordinary course of business. Each
Assignor will duly fulfill all obligations on its part to be fulfilled
under or in connection with the Receivables and will do nothing to
materially impair the rights of the Collateral Agent in the
Receivables.
(10) Each Assignor shall endeavor to collect from the account debtor, as
and when due (including, without limitation, amounts which are
delinquent, such amounts to be collected in accordance with generally
accepted lawful collection procedures) any and all amounts owing under
or on account of such Receivable, and apply forthwith upon receipt
thereof all such amounts as are so collected to the outstanding
balance of such Receivable, except that, so long as no Event of
Default is then in existence in respect of which the Collateral Agent
has given notice that this exception is no longer applicable, such
Assignor may allow in the ordinary course of business as adjustments
to amounts owing under its Receivables (i) an extension or renewal of
the time or times of payment, or settlement for less than the total
unpaid balance, which such Assignor finds appropriate in accordance
with sound business judgment and (ii) a refund or credit due as a
result of returned or damaged merchandise or improperly performed
services. The reasonable out-of- pocket costs and expenses
(including, without limitation, attorneys' fees) of collection,
whether incurred by such Assignor or the Collateral Agent, shall be
borne by such Assignor.
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(11) Upon the occurrence and during the continuance of an Event of Default,
and if the Collateral Agent so directs the relevant Assignor, to the
extent permitted by applicable law, such Assignor agrees (x) to cause
all payments on account of the Receivables to be made directly to a
special designated account of the Collateral Agent (hereinafter the
"Cash Collateral Account"), (y) that the Collateral Agent may, at its
option, directly notify the obligors with respect to any Receivables
to make payments with respect thereto as provided in preceding clause
(x) and (z) that the Collateral Agent may enforce collection of any
such Receivables and may adjust, settle or compromise the amount of
payment thereof. The Collateral Agent may apply any or all amounts
then in, or thereafter deposited in, the Cash Collateral Account in
the manner provided in Section 9(5) of this Agreement. The reasonable
out-of-pocket costs and expenses (including attorneys' fees) of
collection, whether incurred by such Assignor or the Collateral Agent,
shall be borne by such Assignor.
(12) If any Assignor owns or acquires any instrument in connection with the
Collateral, such Assignor will within 10 days notify the Collateral
Agent thereof, and upon request by the Collateral Agent promptly
deliver such instrument to the Collateral Agent appropriately endorsed
to the order of the Collateral Agent as further security hereunder.
(13) Each Assignor will, at its own expense, make, execute, endorse,
acknowledge, file and/or deliver to the Collateral Agent from time to
time such receipts, invoices, schedules, confirmatory assignments,
conveyances, transfer endorsements, powers of attorney, certificates,
reports and other assurances or instruments and take such further
steps relating to its Receivables, instruments and other property or
rights covered by the security interest hereby granted, as the
Collateral Agent may reasonably require to give effect to the purposes
of this Agreement.
Section 5
SPECIAL PROVISIONS CONCERNING INVENTORY AND EQUIPMENT
(1) The transfer of all right, title and interest (including expectancy
rights ("Anwartschaftsrechte") with respect to Inventory and Equipment
located at any of the locations shown in ANNEX B hereto at the time of
the signature of this Agreement, shall become effective upon the
conclusion of this Agreement, whereas the transfer of all future
Inventory and Equipment shall be effective at the time of the arrival
of such Collateral at such location without any further action on the
part of the parties or any other person. Insofar as expectancy
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rights under retention of title arrangements ("Eigentumsvorbehalt")
are transferred to the Collateral Agent, the proprietary right will be
acquired by the Collateral Agent directly from the third person at the
time the retention of title arrangement terminates.
(2) Each Assignor represents, warrants and covenants, which
representations, warranties and covenants shall survive execution and
delivery of this Agreement, that he has title, right or interest
(including expectancy rights) to all present and future Inventory and
Equipment located at the locations shown on ANNEX B hereto and that
the respective Assignor is entitled to dispose of these rights.
(3) The transfer of the present and future Collateral shall be replaced by
the obligation of each Assignor, to store the Collateral for the
benefit of the Collateral Agent with due diligence and care
("Besitzkonstitut").
(4) The Collateral Agent is entitled to repay obligations of each Assignor
vis-a-vis third persons with respect to the Collateral.
(5) Each Assignor will keep and maintain at its own cost and expense
satisfactory and complete records of any Inventory and Equipment,
including, but not limited to, the originals of all documentation
(including each contract) with respect thereto, and such Assignor will
make the same available to the Collateral Agent for inspection, at
such Assignor's own cost and expense, at any and all reasonable times
upon demand and upon reasonable advance notice.
(6) Each Assignor shall be entitled to dispose of the Collateral in the
ordinary course of business, provided, that no Event of Default has
occurred and provided further, that the security interest of the
Collateral Agent with respect to the Collateral shall not be
materially impaired or affected.
(7) The security interests in Equipment created by this Agreement shall
be subject to any Lien on Equipment permitted by Section 9.01 of the
Credit Agreement until such time as such Lien no longer attaches to
such Equipment.
Section 6
SPECIAL PROVISIONS CONCERNING MARKS
(1) Each Assignor represents and warrants, to the best of its knowledge
after due inquiry, that it is the true and lawful owner of the
registered and unregistered Marks listed in ANNEX E attached hereto
and that ANNEX E lists all the Marks
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Page 15
registered in the Trademark Register of the German Patent Office or
the equivalent thereof in any foreign country and, to the best of its
knowledge, all unregistered Marks that such Assignor now owns or uses
for products developed by such Assignor in connection with its
business. Each Assignor represents and warrants that except with
respect to those licensed Marks set forth in ANNEX E, to the best of
its knowledge after due inquiry, it owns all trademarks that it uses.
Each Assignor further warrants that it is aware of no third party
claim that any aspect of such Assignor's present or contemplated
business operations infringes or will infringe any trademark in a
manner which could have a material effect on the financial condition,
business or property of such Assignor. Notwithstanding the foregoing,
the representations contained in this Section 6(1) will only be deemed
to be breached by matters that have, or would reasonably be expected
to have, a Material Adverse Effect.
(2) Each Assignor hereby agrees not to divest itself of any right under a
Significant Mark, other than in the ordinary course of business,
absent prior written approval of the Collateral Agent.
(3) Each Assignor agrees, promptly upon learning thereof, to notify the
Collateral Agent in writing of the name and address of, and to furnish
such pertinent information that may be available with respect to, any
party who may be infringing or otherwise violating any of such
Assignor's right in and to any Mark that has a material effect on the
financial condition, business or property of such Assignor taken as a
whole (each such Mark, a "Significant Mark"), or with respect to any
party claiming that such Assignor's use of any Significant Mark
violates any property right of that party, to the extent that such
infringement or violations could have a material effect on the
financial condition, business or property of such Assignor. Each
Assignor further agrees, unless otherwise directed by the Collateral
Agent, diligently to prosecute any person infringing any Significant
Mark in a manner consistent with its past practice and in the ordinary
course of business.
(4) Each Assignor agrees to use or license the use of its Significant
Marks in commerce during the time in which this Agreement is in
effect, sufficiently to preserve such Significant Marks as trademarks
registered under the laws of the Federal Republic of Germany or the
relevant foreign jurisdiction.
(5) Each Assignor shall at its own expense, diligently process all
documents required by Section 47 of the German Trademark Act and any
foreign equivalent thereof to maintain trademark registration, the
failure of which would reasonably be expected to have a Material
Adverse Effect, including, but not limited to,
<PAGE> 394
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Page 16
affidavits of use and applications for renewals of registration in the
German Patent Office or equivalent governmental agency in any foreign
jurisdiction for all its Marks (excluding unregistered Marks), and
shall pay all fees an disbursements in connection therewith, and shall
not abandon any such filing of affidavit of use or any such
application of renewal prior to the exhaustion of all administrative
and judicial remedies without prior written consent of the Collateral
Agent, which consent shall not be unreasonably withheld, unless such
Assignor shall determine that the pursuit or maintenance thereof is no
longer desirable in the conduct of the business of such Assignor and
that the loss thereof is not disadvantageous in any material respect
to such Assignor.
(6) If any mark registration issued hereafter to an Assignor as a result
of any application now or hereafter before the German Patent Office or
equivalent governmental agency in any foreign jurisdiction within
thirty (30) days of receipt of such certificate, such Assignor shall
deliver a copy of such certificate, and a confirmatory grant of
security in such mark to the Collateral Agent, the form of such
confirmatory grant reasonably acceptable to the Collateral Agent.
(7) If an Event of Default shall occur and be continuing, the Collateral
Agent may, by written notice to the relevant Assignor, take any or all
of the following actions: (i) declare the right of such Assignor in
and to each of the Marks together with all trademark rights and rights
of protection to the same, vested; (ii) take and use or sell the
Marks and the goodwill of such Assignor's business symbolized by the
Marks and the right to carry on the business and use the assets of the
Assignor in connection with which the Marks have been used; and (iii)
direct such Assignor to refrain, in which event such Assignor shall
refrain, from using the Marks in any manner whatsoever, directly or
indirectly, and, if requested by the Collateral Agent, change such
Assignor's corporate name to eliminate therefrom any use of any Mark
and execute such other and further documents that the Collateral Agent
may request to further confirm this. Each Assignor gives all
necessary declarations of ownership of the Marks by signing this
Agreement.
Section 7
SPECIAL PROVISIONS CONCERNING PATENTS,
INDUSTRIAL DESIGNS AND COPYRIGHTS
(1) Each Assignor represents and warrants that, to the best of its
knowledge after due inquiry, it is the true and lawful owner or
licensee of all rights in the Patents listed in
<PAGE> 395
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ANNEX C attached hereto and the Industrial Designs listed in ANNEX C
attached hereto, that said Patents constitute all the Patents,
applications for Patents and intended applications for Patents that
such Assignor now owns and that said Industrial Designs constitute all
the Industrial Designs, applications for Industrial Designs and
intended applications for Industrial Designs that such Assignor now
owns. Each Assignor represents and warrants that, to the best of its
knowledge, it owns or is licensed to practice under all Patents,
Industrial Designs and Copyrights that is now owns, uses or practices
under. Each Assignor further warrants that it is aware of no third
party claim that any aspect of such Assignor's present or contemplated
business operations infringes or will infringe any Patent, Industrial
Design or any Copyright in a manner which could have material effect
on the financial condition, business or property of such Assignor.
(2) Except as otherwise permitted by Section 9.02 of the Credit Agreement,
each Assignor hereby agrees not to divest itself or any right under
any Patent that has a material effect on the financial condition,
business or property of such Assignor taken as a whole (each such
patent, a "Significant Patent"), under any Industrial Design that has
a material effect on the financial condition, business or property of
such Assignor taken as a whole (each such Industrial Design, a
"Significant Industrial Design") or any Copyright that has a material
effect on the financial condition, business or property of such
Assignor taken as a whole (each such copyright, a "Significant
Copyright"), other than in the ordinary course of business absent
prior written approval of the Collateral Agent, which such approval
shall not be unreasonably withheld.
(3) At its own expense, each Assignor shall make timely payment of all
post-issuance fees required pursuant to Section 17 German Patent Act,
Section Section 4(4), 23(2) German Utility Model Act and Section
Section 8 c, 9(3) German Design Act and any other national or foreign
equivalent or additional fee to maintain in force rights under each
Significant Patent, Significant Industrial Design or Significant
Copyright.
(4) Each Assignor agrees, promptly upon learning thereof, to furnish the
Collateral Agent in writing with all pertinent information available
to such Assignor with respect to any infringement or other violation
of such Assignor's rights in any Significant Patent, Significant
Industrial Design or Significant Copyright, or with respect to any
claim that practice of any Significant Patent, Significant Industrial
Design or Significant Copyright violates any property right of that
party to the extent that such infringement or violation could have a
material effect on the financial condition, business or property of
such Assignor. Each Assignor further agrees, absent direction of the
Collateral Agent to the contrary, diligently to prosecute any person
infringing any Significant Patent, Significat
<PAGE> 396
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Page 18
Industrial Design or Significant Copyright, about which it has
knowledge, in a manner consistent with its past practice and in the
ordinary course of business.
(5) At its own expense, each Assignor shall diligently prosecute all
actual and future applications for Patents, Industrial Designs and
Copyrights, of which the intended applications are listed in ANNEX C,
and shall not abandon any such application, except in favor of
continuation application based on such application, prior to
exhaustion of all administrative and judicial remedies, absent written
consent of the Collateral Agent, which such consent shall not be
unreasonably withheld, unless such Assignor shall determine that the
pursuit of maintenance thereof is no longer desirable in the conduct
or the business of such Assignor in that the loss thereof is not
disadvantageous in any material respect to such Assignor.
(6) Within 30 days of an Assignor's receipt of both the Patent application
serial number for a Patent application and the associated inventor
assignments to the Assignor, or 30 days of its filing an application
of registration for an Industrial Design, as the case may be, the
relevant Assignor shall deliver to the Collateral Agent a confirmatory
grant of security of such Patent or Industrial Design, as applicable,
the form of such confirmatory grant to be reasonably acceptable to the
Collateral Agent. Within 30 days of an Assignor's receipt of an
Industrial Design registration certificate or the printed copy of an
issued Patent, as the case may be, the Assignor shall deliver a copy
of the same to the Collateral Agent.
(7) If an Event of Default shall occur and be continuing, the Collateral
Agent may by written notice to the relevant Assignor take any or all
of the following actions (i) declare the entire right, title and
interest of such Assignor in each of the Patents, Industrial Designs
and Copyrights vested; (ii) take and practice or sell the Patents,
Industrial Designs and Copyrights; (iii) direct such Assignor to
refrain, in which event such Assignor shall refrain, from practicing
the Patents, Industrial Designs and Copyrights directly or indirectly,
and such Assignor gives all necessary declarations relating to the
transfer of ownership of the Patents, Industrial Designs and
Copyrights by signing this Agreement and shall execute such other and
further documents as the Collateral Agent may request further to
confirm this.
Section 8
PROVISIONS CONCERNING ALL COLLATERAL
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(1) Each Assignor will do nothing to impair the rights of the Collateral
Agent in the Collateral. Each Assignor will at all times keep its
Inventory and Equipment insured in favor of the Collateral Agent, at
its own expense, to the extent required by the Credit Agreement
against fire, theft and all other risks to which such Collateral may
be subject; all policies or certificates with respect to such
insurance shall be endorsed to the Collateral Agent's satisfaction for
the benefit of the Collateral Agent (including, without limitation, by
naming the Collateral Agent as an additional insured and loss payee)
and copies thereof shall be delivered upon request to the Collateral
Agent. If an Assignor shall fail to insure such Inventory and/or
Equipment to the extent required by the Credit Agreement, or if such
Assignor shall fail to so endorse all policies or certificates with
respect thereto, the Collateral Agent shall have the right (but shall
be under no obligation) to procure such insurance and such Assignor
agrees to reimburse the Collateral Agent for all costs and expenses of
procuring such insurance. The Collateral Agent may apply any proceeds
of such insurance in accordance with Section 9(5), it being understood
and agreed that the Assignor shall be permitted to first use any such
proceeds to repair and/or replace the relevant Collateral. Each
Assignor assumes all liability and responsibility in connection with
the Collateral acquired by it and the liability of such Assignor to
pay its Secured Obligations shall in no way be affected or diminished
by reason of the fact that such Collateral may be lost, destroyed,
stolen, damaged or for any reason whatsoever unavailable to such
Assignor.
(2) Each Assignor agrees that if any warehouse receipt or receipt in the
nature of a warehouse receipt is issued with respect to any of its
Inventory, such warehouse receipt or receipt in the nature thereof
shall not be negotiable (in the sense of Section 424 German
Commercial Code).
(3) Each Assignor will, at its own expense, make, execute, endorse,
acknowledge, file and/or deliver to the Collateral Agent from time to
time such lists, descriptions and designations of its Collateral,
warehouse receipts, receipts in the nature of warehouse receipts,
bills of lading, documents of title, vouchers, invoices, schedules,
confirmatory assignments, conveyances, financing statements, transfer
endorsements, powers of attorney, certificates, reports and other
assurances or instruments and take such further steps relating to the
Collateral and other property or rights covered by the security
interest hereby granted, which the Collateral Agent reasonably deems
appropriate or advisable to perfect, preserve or protect its security
interest in the Collateral.
(4) The Assignors agree to prepare and deliver to the Collateral Agent no
later than on the eighth day of each month a duly certified schedule
or schedules in the
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Page 20
form of a computer printout, showing (i) as to Receivables, the
identity, amount and maturity date of any and all Receivables existing
as of the last day of the previous month, as well as the names and
addresses of all account debtors, (ii) as to Inventory and Equipment,
each object being Collateral, their number and the rights of the
Assignors to it, each such schedule accompanied by each Assignor's
representation that as of the date of such schedule it has not
generally ceased to make payments when due, that no application for
the institution of bankruptcy proceedings has been filed against it
and that it does not expect any such events to arise within the
foreseeable future. The failure of one or several Assignors to
include a Receivable or Inventory or Equipment in any such schedule or
schedules does not affect the validity of the assignment of such
Receivable or transfer of the rights with respect to Inventory or
Equipment to the Collateral Agent hereunder.
(5) The Collateral Agent and such representatives or agents as the
Collateral Agent may reasonably designate shall have the right, at
reasonable time and as often as reasonably requested, to inspect all
records relating to the Collateral and to make extracts and copies
from such records and to inspect all locations where Collateral is
stored. They have therefore the right to enter and inspect the
Assignor's premises, to discuss the Assignor's affairs with the
officers of the Assignors and their independent accountants and to
verify under reasonable procedures all matters relating to the
Collateral, i.e., validity, amount, quality, quantity, value and
condition, including contacting account debtors or any third person
for the purpose of making such a verification. The Collateral Agent
may only contact account debtors or third persons if the Collateral
Agent, in good faith, considers that the existence, value,
effectiveness or priority of the security interests is or may be
prejudiced by an action, omission, event or circumstance whatsoever
and only after prior notice to the Assignors. No such notice is
required if the Collateral Agent considers, in good faith, that the
imminence or severity of a prejudice to the existence, value,
effectiveness or priority of the security interest in respect of the
Collateral is such that the delay caused by the giving of such notice
is or might be likely to induce or increase such a prejudice. The
statutory rights of the Assignors' shareholder/s and managing
director/s shall not be affected or reduced thereby.
Section 9
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
(1) Each Assignor agrees that, if any Event of Default shall have occurred
and be continuing, then and in every such case, subject to any
mandatory requirements
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of applicable law then in effect, the Collateral Agent, in addition to
any rights now or hereafter existing under applicable law, may:
personally, or by agents or attorneys, immediately, without the
necessity to obtain a prior court order,
(i) retake possession of the Collateral or any part thereof, from such
Assignor or any other Person who then has possession of any part
thereof with or without notice of process of law, and for that purpose
may enter upon such Assignor's premises where any of the Collateral is
located and remove the same and use in connection with such removal
any and all services, supplies, aids and other facilities of such
Assignor;
(ii) instruct the obligor or obligors on any agreement, instrument or
other obligation (including, without limitation, the Receivables)
constituting the Collateral to make any payment required by the terms
of such instrument or agreement directly to the Collateral Agent;
(iii) sell, assign or otherwise liquidate, or direct such Assignor to
sell, assign or otherwise liquidate, any or all of the Collateral or
any part thereof, and take possession of the proceeds of any such sale
or liquidation;
(iv) withdraw any or all monies, securities and/or instruments in the
Cash Collateral Account for application to the Secured Obligations in
accordance with paragraph (5) hereof;
(v) take possession of the Collateral or any part thereof, by
directing such Assignor in writing to deliver the same to the
Collateral Agent at any place or places designated by the Collateral
Agent, in which event such Assignor shall at its own expense:
(A) forthwith cause the same to be moved to the place or places
so designated by the Collateral Agent and there delivered to the
Collateral Agent,
(B) store and keep any Collateral so delivered to the Collateral
Agent at such place or places pending further action by the
Collateral Agent as provided in Section 7, paragraph 2, and
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(C) while the Collateral shall be so stored and kept, provide
such guards and maintenance services as shall be necessary to
protect the same and to preserve and maintain them in good
condition;
(2) Upon the occurrence and continuance of an Event of Default, any
Collateral repossessed by the Collateral Agent under or pursuant to
Section 9(1) and any other Collateral whether or not so repossessed by
the Collateral Agent, may be sold, assigned, leased or otherwise
disposed of under one or more contracts or as an entirety, and without
the necessity of gathering at the place of sale the property to be
sold, and in general in such manner, at such time or times, at such
place or places and on such terms as the Collateral Agent may, in
compliance with any mandatory requirements of applicable law,
determine to be commercially reasonable. Any of the Collateral may be
sold, leased or otherwise disposed of, in the condition in which the
same existed when taken by the Collateral Agent or after any overhaul
or repair which the Collateral Agent shall determine to be
commercially reasonable.
(3) Any such disposition which shall be a private sale or other private
proceedings permitted by such requirements shall be made upon not less
than ten (10) days' written notice to such Assignor specifying the
time at which such disposition is to be made and the intended sale
price or other consideration therefor, and shall be subject, for the
ten (10) days after the giving of such notice, to the right of the
relevant Assignor or any nominee of the relevant Assignor to acquire
the Collateral involved at a price or for such other consideration at
least equal to the intended sale price or other consideration so
specified. Any such disposition which shall be a public sale
permitted by such requirements shall be made upon not less than ten
(10) days' written notice to the relevant Assignor specifying the time
and place of such sale and, in the absence of applicable requirements
of law, shall be by public auction (which may, at the Collateral
Agent's option, be subject to reserve), after publication of notice of
such auction not less than 10 days prior thereto in two newspapers in
general circulation in the city where such Collateral is located. To
the extent permitted by any such requirement of law, the Collateral
Agent on behalf of the Creditors (or certain of them) may bid for and
become the purchaser (by bidding in Secured Obligations or otherwise)
of the Collateral or any item thereof, offered for sale in accordance
with this Section without accountability to the relevant Assignor
(except to the extent of surplus money received as provided in Section
7, paragraph (5). If, under mandatory requirements of applicable law,
the Collateral Agent shall be required to make disposition of the
Collateral within a period of time which does not permit the giving of
notice to the Assignor as hereinabove specified, the Collateral Agent
need give the relevant Assignor only such notice of
<PAGE> 401
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Page 23
disposition as shall be reasonably practicable in view of such
mandatory requirements of applicable law.
(4) Except as otherwise provided in this Agreement, each Assignor hereby
further waives, to the extent permitted by law:
(i) all damages occasioned by such taking of possession except any
damages which are the direct result of the Collateral Agent's gross
negligence or wilful misconduct;
(ii) all other requirements as to the time, place and terms of sale or
other requirements with respect to the enforcement of the Collateral
Agent's rights hereunder; and
(iii) all rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any applicable
law in order to prevent or delay the enforcement of this Agreement or
the absolute sale of the Collateral or any portion thereof, and each
Assignor, for itself and all who may claim under it insofar as it or
they now or hereafter lawfully may, hereby waives the benefit of all
such laws.
Any sale of, or the grant of options to purchase, or any other
realization upon, any Collateral shall operate to divest all right,
title, interest, claim and demand of the relevant Assignor therein and
thereto, and shall be a perpetual bar against the relevant Assignor
and against any and all Persons claiming or attempting to claim the
Collateral so sold, optioned or realized upon, or any part thereof,
from, through and under the relevant Assignor.
(5) (a) The proceeds of any Collateral obtained pursuant to Section 9,
paragraph (1) or disposed of pursuant to Section 9, paragraph (2)
shall be applied as follows:
(i) first, to the payment of all Primary Obligations
of the type described in clauses (iv) and (v) of Section 1(1) to
the Collateral Agent;
(ii) second, to the extent proceeds remain after the
application pursuant to preceding clause (i), an amount equal to
the outstanding Primary Obligations to the Creditors shall be
paid to the Creditors as provided in this Section 9, paragraph
(5)(a) hereof with each Creditor receiving an amount equal to its
outstanding Primary Obligations or, if the proceeds are
insufficient to pay in full all such Secured Obligations, its Pro
<PAGE> 402
EXHIBIT K
Page 24
Rata Share (as defined below) of the amount remaining to be
distributed; and
(iii) third, to the extent remaining after the
application pursuant to the preceding clauses (i) and (ii) an
amount equal to the outstanding Secondary Obligations shall be
paid to the Creditors as provided in paragraph (5) (c) hereof,
with each Creditor receiving an amount equal to its outstanding
Secondary Obligations or, if the proceeds are insufficient to pay
in full all such Secondary Obligations, its Pro Rata Share of the
amount remaining to be distributed; and
(iv) fourth, to the extent proceeds remain after the
application pursuant to the preceding clauses (i) through (iii)
inclusive, and following the termination of this Agreement
pursuant to Section 12 paragraph 9 hereof, to the relevant
Assignor or to whomever may be lawfully entitled to receive such
surplus, if any.
(b) For purposes of this Agreement, (x) "Pro Rata Share" shall mean,
when calculating a Creditor's portion of any distribution or amount,
the amount (expressed as a percentage) equal to a fraction the
numerator of which is the then outstanding amount of the relevant
Secured Obligations owed to such Creditor and the denominator of which
is the then outstanding amount of all Secured Obligations, (y)
"Primary Obligations" shall mean (i) in the case of the Credit
Document Obligations, all obligations and liabilities of the German
Borrowers arising out of or in connection with the principal of, and
interest on, all Deutsche Mark Loans, all Unpaid Drawings (related to
Deutsche Mark Letters of Credit) theretofore made (together with all
interest accrued thereon), and the aggregate stated amounts of all
German Letters of Credit issued under the Credit Agreement, together
with all fees, (ii) in the case of the Other Obligations, all amounts
due under the Additional Agreements, (other than indemnities, fees
(including, without limitation, attorney's fees) and similar
obligations and liabilities) and (iii) in the case of Bally Gaming
International GmbH Senior Secured Loans, all obligations of Bally
Gaming International GmbH thereunder and (z) "Secondary Obligations"
shall mean all Secured Obligations other than Primary Obligations.
(c) All payments required to be made to the Creditors hereunder shall
be made to the Collateral Agent for the account of the respective
Creditors in accordance with Section 7.4 (c) through (f) of the U.S.
Security Agreement (Exhibit J to the Credit Agreement), a copy of
which is attached hereto as ANNEX G applies.
<PAGE> 403
EXHIBIT K
Page 25
(d) It is understood that the Assignors shall remain jointly and
severally liable to the extent of any deficiency between (x) the
amount of the proceeds of the Collateral and (y) the aggregate
outstanding amount of the Secured Obligations.
(6) Each and every right, power and remedy hereby specifically given to
the Collateral Agent shall be in addition to every other right, power
and remedy specifically given under this Agreement, the other Credit
Documents or the Additional Agreements or now or hereafter existing,
or by statute and each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised from
time to time or simultaneously and as often and in such order as may
be deemed expedient by the Collateral Agent. All such rights, powers
and remedies shall be cumulative and the exercise or the beginning of
exercise of one shall not be deemed a waiver of the right to exercise
of any other or others. No delay or omission of the Collateral Agent
in the exercise of any such right, power or remedy and no renewal or
extension of any of the Secured Obligations shall impair any such
right, power or remedy or shall be construed to be a waiver of any
Default or Event of Default or an acquiescence therein. In the event
that the Collateral Agent shall bring any suit to enforce any of its
rights hereunder and shall be entitled to judgment, then in such suit
the Collateral Agent may recover reasonable expenses, including
attorneys' fees, and the amounts thereof shall be included in such
judgment.
(7) In case the Collateral Agent shall have instituted any proceeding to
enforce any right, power or remedy under this Agreement by
foreclosure, sale, entry or otherwise, and such proceeding shall have
been discontinued or abandoned for any reason or shall have been
determined adversely to the Collateral Agent, then and in every such
case the relevant Assignor, the Collateral Agent and each holder of
any of the Secured Obligations shall be restored to their former
positions and rights hereunder with respect to the Collateral subject
to the security interest created under this Agreement, and all rights,
remedies and powers of the Collateral Agent shall continue as if no
such proceeding had been instituted.
Section 10
INDEMNITY
(1) The Assignors jointly and severally agree to indemnify, reimburse and
hold the Collateral Agent, each Creditor and its respective
successors, assigns, employees, agents and servants (hereinafter in
this Section 10(1) referred to individually as "Indemnitee" and
collectively as "Indemnitees") harmless from
<PAGE> 404
EXHIBIT K
Page 26
any and all liabilities, obligations, losses, damages, penalties,
claims, demands, actions, suits, judgments and any and all reasonable
out-of-pocket costs and expenses (including reasonable attorneys' fees
and expenses) (for the purposes of this Section 10(1) the foregoing
are collectively called "expenses") of whatsoever kind and nature
imposed on, asserted against or incurred by any of the Indemnitees in
any way relating to or arising out of this Agreement, any other Credit
Document, the Additional Agreements or the documents executed in
connection herewith and therewith or in any other way connected with
the enforcement of any of the terms of, or the preservation of any
rights under any thereof, or in any way relating to or arising out of
the manufacture, ownership, ordering, purchase, delivery, control,
acceptance, lease, financing, possession, operation, condition, sale,
return or other disposition, or use of the Collateral (including,
without limitation, latent or other defects, whether or not
discoverable), the violation of the laws of any country, state or
other governmental body or unit, any tort (including, without
limitation, claims arising or imposed under the doctrine of strict
liability, or for or on account of injury to or the death of any
Person (including any Indemnitee), or property damage), or contract
claim; provided that no Indemnitee shall be indemnified pursuant to
this Section 10(1) for losses, damages or liabilities to the extent
caused by the gross negligence or wilful misconduct of such Person to
be indemnified or of any other Indemnitee who is such Person or an
affiliate of such Person. If any claim is asserted against any
Indemnitee, such Indemnitee shall promptly notify the Assignor and
each Indemnitee may, and if requested by the Assignor shall, in good
faith, contest the validity, applicability and amount of such claim
with counsel (reasonably acceptable to such Assignor) selected by such
Indemnitee, and shall permit the Assignor to participate in such
contest. In addition, in connection with any claim covered by this
Section 10(1) against more than one Indemnitee, all such Indemnitees
shall be represented by the same legal counsel selected by such
Indemnitees; provided, however, that if such legal counsel determines
in good faith that representing all such Indemnitees would or could
result in a conflict of interest under the laws or ethical principles
applicable to such legal counsel or that a defense or counterclaim is
available to an Indemnitee that is not available to all such
Indemnitees, then to the extent reasonably necessary to avoid such a
conflict of interest or to permit unqualified assertion of such a
defense or counterclaim, each Indemnitee shall be entitled to separate
representation by a legal counsel selected by that Indemnitee. Each
Assignor agrees that upon written notice by any Indemnitee of the
assertion of such a liability, obligation, loss, damage, penalty,
claim, demand, action, judgment or suit, such Assignor shall assume
full responsibility for the defense thereof. Each Indemnitee agrees
to use its
<PAGE> 405
EXHIBIT K
Page 27
best efforts to promptly notify the relevant Assignor of any such
assertion of which such Indemnitee has knowledge.
(2) Without limiting the application of Section 10(1), the Assignors
jointly and severally agree to pay, or reimburse the Collateral Agent
for (if the Collateral Agent shall have incurred fees, costs or
expenses because an Assignor shall have failed to comply with its
obligations under this Agreement or any Credit Document), any and all
out-of-pocket costs and expenses of whatever kind or nature incurred
in connection with the creation, preservation or protection of the
Collateral Agent's Liens on, and security interest in, the Collateral,
including, without limitation, all fees and taxes in connection with
the recording or filing of instruments and documents in public
offices, payment or discharge of any taxes or Liens upon or in respect
of the Collateral, premiums for insurance with respect to the
Collateral and all other fees, costs and expenses in connection with
protecting, maintaining or preserving the Collateral and the
Collateral Agent's interest therein, whether through judicial
proceedings or otherwise, or in defending or prosecuting any actions,
suits or proceedings arising out of or relating to the Collateral.
(3) Without limiting the application of Section 10(1) or 10(2), the
Assignors jointly and severally agree to pay, indemnify and hold each
Indemnitee harmless from and against any loss, costs, damages and
expenses which such Indemnitee may suffer, expend or incur in
consequence of or growing out of any material misrepresentation by an
Assignor in this Agreement, or in any statement or writing
contemplated by or made or delivered pursuant to or in connection with
this Agreement.
(4) If and to the extent that the obligations of any Assignor under
Sections 10(1) to 10(3) are unenforceable for any reason, each
Assignor hereby agrees to make the maximum contribution to the payment
and satisfaction of such obligations which is permissible under
applicable law.
(5) Any amounts paid by any Indemnitee prior to the termination of this
Agreement as to which such Indemnitee has the right to reimbursement
shall constitute Secured Obligations secured by the Collateral. The
indemnity obligations of the Assignors contained in this Section 10
shall continue in full force and effect notwithstanding the full
payment of all other Secured Obligations and notwithstanding the
discharge thereof.
<PAGE> 406
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Section 11
DEFINITIONS
The following terms shall have the meanings herein specified unless
the context otherwise requires. Such definitions shall be equally applicable
to the singular and plural forms of the terms defined.
"Agreement" shall mean this Security Agreement as the same may be
modified, supplemented or amended from time to time in accordance with
its terms.
"Collateral" shall mean (i) each and every Receivable against
Third Persons (it being understood, however, that in the case of Bally
Gaming International GmbH Senior Secured Loans, the Receivables of
Bally Gaming International shall be considered "Collateral"), (ii) any
and all Equipment or Inventory which at the time of the execution
hereof is, or in the future, will be located on any of the premises
currently occupied by any Assignor that are listed in Annex B attached
hereto, (iii) each and every Intellectual Property Right, and (iv) all
Proceeds and products of any and all of the items referred to in
clauses (i) through (iii) above.
"Copyrights" shall mean any German or foreign copyright owned by
any Assignor nor or hereafter, including any registration of any
copyrights or the equivalent thereof, as well as any application for
copyright registration now or hereafter in any jurisdiction by any
Assignor.
"Equipment" shall mean any equipment and, in any event, shall
include, but shall not be limited to, all machinery, equipment,
furnishings, fixtures and vehicles and any and all additions,
substitutions and replacements of any of the foregoing, wherever
located, together with all attachments, components, pans, equipment
and accessories installed thereon or affixed thereto.
"Industrial Designs" shall mean any German, European, or foreign
registrable utility model or any other registrable design protected
under any national or international law to which any Assignor now or
thereafter has title and any divisions or continuations thereof,
including any application for a German or any other foreign Industrial
Design now or thereafter made by Assignor, as well as any Industrial
Design made in future by any Assignor in any area of any Assignor's
business activities.
"Intellectual Property Rights" shall mean Marks, Patents,
Industrial Designs, Copyrights and Proprietary Assets as defined in
Section 11.
<PAGE> 407
EXHIBIT K
Page 29
"Inventory" shall mean merchandise, inventory and goods, and all
additions, substitutions and replacements thereof, wherever located,
together with all goods, supplies, incidentals, packaging materials,
labels, materials and any other items used or usable in manufacturing,
processing, packaging or shipping same; in all stages of production
from raw materials through work-in-process to finished goods -- and
all products and proceeds of whatever sort and wherever located and
any portion thereof which may be returned, rejected, reclaimed or
repossessed by the Collateral Agent from an Assignor's customers.
"Marks" shall mean all rights in any trademark or parts of it
protected by the German Trademark Act, International trademark law or
any foreign trademark law or equivalent thereof now held or in the
future acquired by any Assignor, including any application for
registration of any trademarks in the register of the German Patent
Office or the equivalent thereof in any foreign country.
"Patents" shall mean any German, European or any other foreign
patent to which any Assignor now or thereafter has title and any
divisions or continuations thereof, including any application for a
German, European or any other foreign patent now or thereafter made by
any Assignor, also covering any rights and entitlements to a Patent
due to these inventions.
"Proceeds" shall be (i) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to the Collateral Agent or an
Assignor from time to time with respect to any of the Collateral, (ii)
any and all payments (in any form whatsoever) made or due and payable
to an Assignor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part
of the Collateral by any governmental authority (or any person acting
under color of governmental authority), (iii) any and all other
amounts from time to time paid or payable under or in connection with
any of the Collateral, and (iv) any other similar benefit arising from
or in connection with the Collateral.
"Proprietary Assets" shall mean all information and know-how of
any Assignor, including, without limitation, technical data;
manufacturing data; research and development data; data relating to
compositions, processes and formulations, manufacturing and production
know-how and experience; management know-how; training programs
manufacturing, engineering and other drawings; specifications;
performance criteria; operation instructions; maintenance manuals;
technology; technical information, software and computer programs;
engineering and computer data and databases; catalogues; financial,
<PAGE> 408
EXHIBIT K
Page 30
business and marketing plans; unpatentable inventions; trade secrets,
as well as trade dresses including logos, designs, company names,
business name, fictitious business names and other business
identifiers.
"Receivables" shall mean (i) all the existing and future accounts
receivable (including the accounts receivable owed by foreign
Customers) from the delivery of goods and services against all debtors
of the Assignors as well as any respective expectancy rights
("Anwartschaften"), (ii) all existing and future claims and respective
expectancy rights ("Anwartschaften") under any and all letters of
credit issued in favor of the Assignors and (iii) all present and
future current account balances ("Kontokorrentverhaltnis") with
account debtors along with the right to terminate any current account
arrangement and the right to determine the balance of a current
account.
"Third Persons" shall mean (i) any company which is not a direct
or indirect subsidiary or direct or indirect parent company of the
Borrowers and (ii) any natural person.
Section 12
MISCELLANEOUS
(1) Notices. All notices and other communications hereunder shall be in
writing and shall be delivered or mailed by first class mail, postage prepaid,
addressed:
(i) if to the Assignor, at its address contained in the Credit
Agreement (for the German Borrowers) or the German Subsidiary Guaranty
(for the other Assignors);
(ii) if to the Collateral Agent, at:
Credit Suisse First Boston
Eleven Madison Avenue
New York, New York 10010
Attention: Ed Barr
Telephone No.: (212) 325-9151
Facsimile No.: (212) 325-8309
(iii) if to any Lender Creditor (other than the Collateral Agent), at
such address as such Lender Creditor shall have specified in the
Credit Agreement or the Additional Agreements;
<PAGE> 409
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or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
(2) Waiver; Amendment. (a) None of the terms and conditions of this Agreement
may be changed, waived, modified or varied in any manner whatsoever unless in
writing duly signed by each Assignor directly affected thereby (it being
understood that additional Assignors may be added as parties hereto from time
to time in accordance with Section 12 paragraph 13 and that no consent of any
other Assignor or of the Required Lenders shall be required in connection
therewith) and the Collateral Agent (with the consent of the Required Lenders
or, to the extent required by Section 13.12 of (x) the Credit Agreement, all of
the Lenders at all times prior to the time of which all Credit Document
Obligations have been paid in full or (y) the holders of at least a majority of
the outstanding Other Obligations at all times after the time at which all
Credit Document Obligations have been paid in full), provided, that any change,
waiver, modification or variance affecting the rights and benefits of a single
Class of Creditors (and not all Creditors in a like or similar manner) shall
require the written consent of the Requisite Creditors of such Class of
Creditors. For the purpose of this Agreement, the term "Class" shall mean each
class of Secured Creditors, i.e., whether (x) the Lender Creditors as holders
of the Credit Document Obligations or (y) the Other Creditors as the holders of
the Other Obligations. For the purpose of this Agreement, the term "Requisite
Creditors" of any Class shall mean each of (x) with respect to the Credit
Document Obligations, the Required Lenders and (y) with respect to the Other
Obligations, the holders of at least a majority of all obligations outstanding
from time to time under the Additional Agreements. (b) No delay on the part of
the Collateral Agent in exercising any of its rights, remedies, powers and
privileges hereunder or partial or single exercise thereof, shall constitute a
waiver thereof. No notice to or demand on any Assignor in any case shall
entitle it to any other or further notice or demand in similar or other
circumstances or constitute a waiver of any of the rights of the Collateral
Agent to any other or further action in any circumstances without notice or
demand.
(3) Obligations Absolute. The obligations of each Assignor hereunder
shall remain in full force and effect without regard to, and shall not be
impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of any Assignor; (b) any
exercise or non-exercise, or any waiver of, any right, remedy, power or
privilege under or in respect of this Agreement, any other Credit Document or
any Additional Agreement or (c) any amendment to or modification of other
Credit Documents or Additional Agreements or any security for any of the
Secured Obligations; whether or not any Assignor shall have notice or knowledge
of any of the foregoing. The rights and remedies of the Collateral Agent
<PAGE> 410
EXHIBIT K
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herein provided are cumulative and not exclusive of any rights or remedies
which the Collateral Agent would otherwise have.
(4) Successors and Assigns. This Agreement shall be binding upon each
Assignor and its successors and assigns and shall inure to the benefit of the
Collateral Agent and its permitted successors and assigns. All agreements,
statements, representations and warranties made by each Assignor herein or in
any certificate or other instrument delivered by such Assignor or on its behalf
under this Agreement shall be considered to have been relied upon by the Lender
Creditors and shall survive the execution and delivery of this Agreement and
the other Credit Documents regardless of any investigation made by the Lender
Creditors on their behalf.
(5) Headings Descriptive. The headings of the several sections of this
Agreement are inserted for convenience only and shall not in any way affect the
meaning or construction of any provision of this Agreement.
(6) Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(7) GOVERNING LAW; JURISDICTION. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAW OF THE FEDERAL REPUBLIC OF GERMANY. Exclusive place of
jurisdiction for any dispute arising out of or in connection with this
Agreement shall be at Berlin; provided that nothing in this Agreement shall be
deemed or operate to preclude the Collateral Agent from bringing suit or taking
other legal action against the Assignors before any other court of competent
jurisdiction with respect to any such claims or disputes.
(8) Assignors' Duties. It is expressly agreed, anything herein contained to
the contrary notwithstanding, that each Assignor shall remain liable to perform
all of the obligations, if any, assumed by it with respect to the Collateral
and the Collateral Agent shall not have any obligations or liabilities with
respect to any Collateral by reason of or arising out of this Agreement, nor
shall the Collateral Agent be required or obligated in any manner to perform or
fulfill any of the obligations of an Assignor under or with respect to any
Collateral.
<PAGE> 411
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(9) Termination; Release. When no Deutsche Mark Revolving Note or German
Letter of Credit is outstanding and when all Loans and other Secured
Obligations (other than indemnity obligations, except those referred to in the
first sentence of Section 10(1) have been paid in full, this Agreement shall
terminate, and the Collateral Agent, at the request and expense of the
Assignor, will execute and deliver to the relevant Assignor a proper instrument
or instruments acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to the relevant Assignor
(without recourse and without any representation or warranty) such of the
Collateral as may be in the possession of the Collateral Agent and as has not
theretofore been sold or otherwise applied or released pursuant to this
Agreement.
(10) Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with each German Borrower
and the Collateral Agent.
(11) Collateral Agent. The Collateral Agent will hold in accordance with this
Agreement all items of the Collateral at any time received under this
Agreement. It is expressly understood and agreed that the obligations of the
Collateral Agent as holder of the Collateral and interests therein and with
respect to the disposition thereof, and otherwise under this Agreement, are
only those expressly set forth in this Agreement. The Collateral Agent shall
act hereunder on the terms and conditions set forth in this Agreement and in
Section 13 of the Credit Agreement.
(12) Validity. Should any provision of this Agreement be or become void or
not enforceable in whole or in part, the other provisions of this Agreement
shall remain in force. The void or unenforceable provision shall be
substituted by a valid provision which accomplishes as far as legally possible
the economic purpose of the void or unenforceable provision. The validity of
this Agreement shall not be affected by the invalidity of the Credit Agreement.
(13) Additional Assignors. It is understood and agreed to that any German
Subsidiary that is required to execute a counterpart of this Agreement after
the date hereof pursuant to the Credit Agreement shall automatically become an
Assignor hereunder by executing a counterpart hereof and delivering the same to
the Collateral Agent.
(14) Credit Agreement. This Agreement is made in fulfillment of the Credit
Agreement. To the extent that there is an inconsistency between the terms of
this Agreement and the Credit Agreement except where provisions of German law
have to be observed in order to effectuate the security interests under German
law, any party
<PAGE> 412
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hereto shall be entitled to request the adjustment of this Agreement to the
terms of the Credit Agreement, unless this would violate mandatory German law.
* * *
<PAGE> 413
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their duly authorized officers as of the date
first above written.
the Assignors:
August 8, 1997 New York, NY /s/ Scott Schweinfurth
--------------------------- -------------------------------
(time, place) (Alliance Automaten Verwaltungs
GmbH)
August 8, 1997 New York, NY /s/ Scott Schweinfurth
--------------------------- -------------------------------
(time, place) (Alliance Automaten GmbH&Co. KG)
August 8, 1997 New York, NY /s/ Scott Schweinfurth
--------------------------- -------------------------------
(time, place) (Bally Wulff Vertriebs GmbH)
August 8, 1997 New York, NY /s/ Scott Schweinfurth
--------------------------- -------------------------------
(time, place) (Bally Wulff Automaten GmbH)
August 8, 1997 New York, NY /s/ Scott Schweinfurth
--------------------------- -------------------------------
(time, place) (Geda AutomatenGrosshandel GmbH)
August 8, 1997 New York, NY /s/ Scott Schweinfurth
--------------------------- -------------------------------
(time, place) (Erkens Automated GmbH)
August 8, 1997 New York, NY /s/ Scott Schweinfurth
--------------------------- -------------------------------
(time, place) (Westav Westdeutscher Automaten
GmbH)
August 8, 1997 New York, NY /s/ Scott Schweinfurth
--------------------------- -------------------------------
(time, place) (Bally Gaming International GmbH)
Acknowledged and Agreed to by
August 8, 1997 New York, NY /s/ Scott Schweinfurth
--------------------------- -------------------------------
(time, place) (Credit Suisse First Boston)
August 8, 1997 New York, NY /s/ Scott Schweinfurth
--------------------------- -------------------------------
(time, place) (Credit Suisse First Boston)
<PAGE> 414
EXHIBIT M
<PAGE> 415
EXHIBIT M
[CONFORMED AS EXECUTED]
OFFICER'S SOLVENCY CERTIFICATE
I, the undersigned, the chief financial officer of Alliance
Gaming Corporation, a corporation organized and existing under the laws of the
State of Nevada (the "Company"), do hereby certify that:
1. This Certificate is furnished pursuant to Section 5A.19 of
the Credit Agreement, dated as of August 8, 1997, among Alliance Gaming
Corporation, a Nevada corporation, Bally Wulff Vertriebs GmbH, a company with
limited liability formed under the laws of the Federal Republic of Germany,
Bally Wulff Automaten GmbH, a company with limited liability formed under the
laws of the Federal Republic of Germany (the "Borrowers" and each a
"Borrower"), the lenders from time to time party thereto (the "Lenders") and
Credit Suisse First Boston, as Administrative Agent (such Credit Agreement, as
in effect on the date of this Certificate, being herein called the "Credit
Agreement"). Unless otherwise defined herein, capitalized terms used in this
Certificate shall have the meanings set forth in the Credit Agreement.
2. For purposes of this Certificate, the terms below shall
have the following definitions:
(a) "Fair Value"
The amount at which the assets, in their entirety, of each of
the Company (on a stand-alone basis), the Company and its
Subsidiaries (on a consolidated basis) and each other Borrower
(each on a stand-alone basis), in each case would change hands
between a willing buyer and a willing seller, within a
commercially reasonable period of time, each having reasonable
knowledge of the relevant facts, with neither being under any
compulsion to act.
(b) "Present Fair Salable Value"
The amount that could be obtained by an independent willing
seller from an independent willing buyer if the assets of the
Company (on a stand-alone basis), the Company and its
Subsidiaries (on a consolidated basis) and each other Borrower
(each on a stand-alone basis) are sold with reasonable
promptness under normal selling conditions in a current
market.
<PAGE> 416
EXHIBIT M
Page 2
(c) "New Financing"
The indebtedness incurred or to be incurred by the Company and
its Subsidiaries under the Credit Documents (assuming the full
utilization by each Borrower of the Commitments under the
Credit Agreement), the New Senior Subordinated Notes Documents
and all other financing contemplated by the Documents, in each
case after giving effect to the Transaction and the incurrence
of all financings contemplated therewith.
(d) "Stated Liabilities"
The recorded liabilities (including Contingent Liabilities
that would be recorded in accordance with generally accepted
accounting principles ("GAAP"), consistently applied of each
of the Company (on a stand-alone basis), the Company and its
Subsidiaries (on a consolidated basis) and each other Borrower
(each on a stand-alone basis), in each case as of the date
hereof after giving effect to the Transaction and, without
duplication, the amount of all New Financing.
(e) "Contingent Liabilities"
The maximum estimated amount of liability reasonably likely to
result from pending litigation, asserted claims and
assessments, guaranties, uninsured risks and other contingent
liabilities of each other of the Company (on a stand-alone
basis), the Company and its Subsidiaries (on a consolidated
basis) and each other Borrower (each on a stand-alone basis),
(exclusive of such Contingent Liabilities to the extent
reflected in Stated Liabilities), in each case, estimated by
such parties based on presently known facts and circumstances.
(f) "Will be able to pay its Stated Liabilities, including
Contingent Liabilities, as they mature."
For the period from the date hereof through the stated
maturity of all New Financing, each of the Company (on a
stand-alone basis), the Company and its Subsidiaries (on a
consolidated basis) and each other Borrower (each on a
stand-alone basis), in each case will have sufficient assets,
cash flow and other sources of funds to pay its Stated
Liabilities and Contingent Liabilities as those liabilities
mature or otherwise become due.
(g) "Does not have Unreasonably Small Capital"
<PAGE> 417
EXHIBIT M
Page 3
For the period from the date hereof through the stated
maturity of all New Financing, each of the Company (on a
stand-alone basis), the Company and its Subsidiaries (on a
consolidated basis) and each other Borrower (each on a
stand-alone basis), in each case after consummation of the
Transaction and all Indebtedness (including the Loans, the
Letters of Credit and the New Senior Subordinated Notes) being
incurred or assumed and Liens created in connection therewith,
is a going concern and has sufficient capital to ensure that
it will continue to be a going concern for such period and to
remain a going concern despite moderately negative deviations
from the Projections discussed below.
3. For purposes of this Certificate, I, or officers of the
Company under my direction and supervision, have performed the following
procedures as of and for the periods set forth below.
(a) I have reviewed the financial statements referred to in
Section 7.05(a) and 7.05(b) of the Credit Agreement.
(b) I have reviewed the unaudited pro forma consolidated financial
statements of the Company and their Subsidiaries referred to
in Section 5A.17 of the Credit Agreement and verified the
mathematical accuracy of the application of the pro forma
adjustments to the amounts in the audited consolidated
financial statements.
(c) I have made inquiries of certain other officials of the
Company who have responsibility for financial and accounting
matters regarding:
1. whether the unaudited pro forma consolidated
financial statements referred to in paragraph (b)
above are in conformity with GAAP applied on a basis
substantially consistent with that of the unaudited
financial statements as at March 31, 1997 and
2. whether, at June 30, 1997, there were any decreases
as compared with March 31, 1997, in the consolidated
net assets or the excess of consolidated current
assets over consolidated current liabilities of the
Company and its Subsidiaries.
(d) I have read:
1. the Credit Documents and the respective Schedules and
Exhibits thereto.
<PAGE> 418
EXHIBIT M
Page 4
(e) With respect to Contingent Liabilities, I:
1. inquired of certain officials of the Company who have
responsibility for legal, financial and accounting
matters as to the existence and estimated liability
with respect to all Contingent Liabilities known to
them;
2. confirmed with senior officers of the Company that,
to the best of such officers' knowledge, (i) all
appropriate items were included in Stated Liabilities
or Contingent Liabilities made known to me in the
course of my inquiry and that (ii) the amounts
relating thereto were the maximum estimated amount of
liability reasonably likely to result therefrom as of
the date hereof;
3. hereby certify that, to the best of my knowledge, all
material Contingent Liabilities that are reasonably
likely to arise from any pending litigation, asserted
claims and assessments, guarantees, uninsured risks
and other Contingent Liabilities of the Company and
its Subsidiaries (exclusive of such Contingent
Liabilities to the extent reflected in Stated
Liabilities) have been considered in making the
certification set forth in paragraph 4 below, and
with respect to each such Contingent Liability the
estimable maximum estimated amount of liability with
respect thereto was used in making such
certification.
(f) I have had the Projections, which have been previously
delivered to the Lenders, prepared under my direction and have
re- examined the Projections on the date hereof and considered
the effect thereon of any material changes since the date of
the preparation thereof on the results projected therein.
After such review, I hereby certify that in my opinion the
Projections are reasonable and attainable. Furthermore, the
Projections support the conclusions contained in the last
paragraph of this Certificate. In connection with the
statements made herein, please be advised that the Projections
are based upon a number of assumptions and are subject to
significant economic and competitive uncertainties and
contingencies. There can be no assurance that the Projections
will be realized and the actual results may be higher or lower
than those projected.
(g) I have made inquiries of certain officers of the Company who
have responsibility for financial reporting and accounting
matters regarding whether they were aware of any events or
conditions that, as of the date
<PAGE> 419
EXHIBIT M
Page 5
hereof, would cause the Company (on a stand-alone basis), the
Company and its Subsidiaries (on a consolidated basis) and
each other Borrower (on a stand-alone basis), in each case
after giving effect to the consummation of the Transaction and
the related financing transactions (including the incurrence
of the New Financing and the New Senior Subordinated Notes),
to (i) have assets with a Fair Value or Present Fair Salable
Value that are less than the sum of Stated Liabilities and
Contingent Liabilities; (ii) have Unreasonably Small Capital;
or (iii) not be able to pay its Stated Liabilities and
Contingent Liabilities as they mature or otherwise become due.
4. Based on and subject to the foregoing, I hereby certify on
behalf of the Company that, after giving effect to the Transaction and the
related financing transactions (including the New Financing and the New Senior
Subordinated Notes), to the best of my knowledge, as of the date hereof (i) the
Fair Value and Present Fair Salable Value of the assets of the Company (on a
stand-alone basis), the Company and its Subsidiaries (on a consolidated basis)
and each other Borrower (on a stand-alone basis), in each case exceed its
Stated Liabilities and Contingent Liabilities; (ii) the Company (on a
stand-alone basis), the Company and its Subsidiaries (on a consolidated basis)
and each other Borrower (on a stand-alone basis), in each case will not have
Unreasonably Small Capital; and (iii) the Company (on a stand- alone basis),
the Company and its Subsidiaries (on a consolidated basis) and each other
Borrower (on a stand-alone basis), in each case will be able to pay its Stated
Liabilities and Contingent Liabilities as they mature or otherwise become due.
<PAGE> 420
EXHIBIT M
Page 6
IN WITNESS WHEREOF, the undersigned has caused its duly
authorized chief financial officer to execute and deliver this Certificate this
8th day of August.
ALLIANCE GAMING CORPORATION
By /s/ Scott Schweinfurth
------------------------------------
Title: Senior Vice President, CFO
and Treasurer
<PAGE> 421
EXHIBIT N-1
<PAGE> 422
EXHIBIT N-1
-----------
U.S. BORROWING BASE CERTIFICATE AS OF [DATE]
To: The Lenders party to the Credit Agreement, dated as of
August 8, 1997, among Alliance Gaming Corporation
(the "U.S. Borrower") Bally Wulff Vertriebs GmbH,
Bally Wulff Automten GmbH, the Lenders party thereto
from time to time, and Credit Suisse First Boston, as
Administrative Agent1
Amount in
1. Accounts Receivable U.S. Dollars
------------------- ------------
Gross book value of the receivables of the U.S. $______
Borrower and the Wholly-Owned Subsidiary Guarantors
arising from the sale or lease of inventory or services
by the U.S. Borrower or the Wholly-Owned Subsidiary
Guarantors in the ordinary course of business which
conform to the representations and warranties contained
in the U.S. Security Agreement and the other applicable
U.S. Security Documents (including, without limitation,
that the Collateral Agent shall have and maintain a
first priority perfected security interest in all
such receivables)
Less:
Returns, discounts and claims, of any nature ($______)
(whether issued, owing, granted or outstanding)
Bill and hold (deferred shipment) and ($______)
consignment transactions
Contracts or sales to any Affiliate ($______)
- ----------
(1/) All capitalized terms used herein shall have the meaning provided
therefor in such Credit Agreement.
<PAGE> 423
EXCHIBIT N-1
Page 2
Without duplication, all installment or lease ($______)
receivables where the respective account debtor has
two or more installments which are past due
All receivables from any party subject to any ($______)
bankruptcy, receivership, insolvency or like
proceedings by the account debtor
One-third of the amount of all receivables to ($______)
account debtors outside the United States of
America which would otherwise have been
included as U.S. Eligible Receivables
Book reserves in respect of receivables of the ($______)
U.S. Borrower and the Wholly-Owned Subsidiary
Guarantors to the extent in excess of 20% of
the gross book value of the receivables of such
Persons
2. Eligible Receivables $______
(Net Amount of No. 1)
3. 75% of Eligible Receivables $______
4. Inventory
Book value of the inventory of the U.S. Borrower $______
and the Wholly-Owned Subsidiary Guarantors, which
conforms to the representations and warranties
contained in the U.S. Security Agreement (and in
which a Lien has been granted pursuant to the U.S.
Security Agreement), which inventory is located
in the United States
Less:
Supplies (other than raw materials), goods returned ($______)
or rejected (except to the extent that such returned
or rejected goods continue to conform to the
representations and warranties
<PAGE> 424
EXHIBIT N-1
Page 3
contained in the U.S.Security Agreement) by
customers and goods to be returned to suppliers
Used inventory ($______)
Any advance payments made by customers with ($______)
respect to inventory of the U.S. Borrower and
the Wholly-Owned Subsidiary Guarantors
Inventory subject to any Lien other than the ($______)
Liens created under the U.S. Security Agreement
and the other applicable U.S. Security
Documents
5. Eligible Inventory $______
(Net Amount of No. 4)
6. 40% of Eligible Inventory $______
7. U.S. Borrowing Base $______
(Sum of Nos. 3 and No. 6)
8. Total outstanding Swingline Loans, Dollar $______
Revolving Loans and U.S. Letter of Credit
Outstandings
9. U.S. Borrowing Base Surplus (Deficiency) (No. $______
7 minus No. 8)
The undersigned hereby certifies that all of the information
provided above is true and correct as of the date first above written.
<PAGE> 425
EXHIBIT N-1
Page 4
IN WITNESS WHEREOF, the undersigned has hereunto set his or
her hand this _______ day of _____________, ____.
ALLIANCE GAMING CORPORATION
By_________________________
Name:
Title:
<PAGE> 426
EXHIBIT N-2
<PAGE> 427
EXHIBIT N-2
GERMAN BORROWING BASE CERTIFICATE AS OF [DATE]
To: The Lenders party to the Credit Agreement, dated as of August 8, 1997,
among Alliance Gaming Corporation, Bally Wulff Vertriebs GmbH ("Bally
Wulff Vertriebs"), Bally Wulff Automaten GmbH ("Bally Wulff Automaten"),
the Lenders party thereto from time to time, and Credit Suisse First
Boston, as Administrative Agent1/
<TABLE>
<CAPTION>
Amount in
1. German Borrower Accounts Receivable Deutsche Marks
----------------------------------- --------------
<S> <C>
Gross book value of all receivables of the German Borrowers
arising from the sale or lease of inventory or services by
the German Borrowers in the ordinary course of business which
conform to the representations and warranties contained in
the German Security Agreement and the other applicable German
Security Documents (including, without limitation, that the
Collateral Agent or the Lenders shall have and maintain a
first priority perfected security interest in all such
receivables)
DM______
Less:
Returns, discounts and claims of any nature (whether issued,
owing, granted or outstanding) (DM______)
Bill and hold (deferred shipment) and consignment
transactions (DM______)
Contracts or sales to any Affiliate (DM______)
</TABLE>
____________________
1/ All capitalized terms used herein shall have the meaning provided therefor
in such Credit Agreement.
<PAGE> 428
EXHIBIT N-2
Page 2
<TABLE>
<S> <C> <C>
Without duplication, all installment or lease receivables
where the respective account debtor has two or more
installments which are past due (DM______)
All receivables from any party subject to any bankruptcy,
receivership, insolvency or like proceedings by the account
debtor (DM______)
One-third of the amount of all receivables to account debtors
outside the Federal Republic of German which would otherwise
have been included as German Eligible Receivables
(DM______)
Book reserves in respect of receivables of the German
Borrowers to the extent in excess of 20% of the gross book
value of the receivables of such Persons
(DM______)
2. German Borrower Eligible Receivables
(Net Amount of No. 1) DM______
3. 75% of German Borrower Eligible Receivables DM______
4. German Borrower Inventory
Book value of the inventory of the German Borrowers which
conforms to the representations and warranties contained in
the German Security Agreement and the other applicable German
Security Documents (and in which a Lien has been granted
pursuant to the German Security Agreement), which inventory
is located in the Federal Republic of Germany. DM______
Less:
Supplies (other than raw materials), goods returned or
rejected (except to the extent that such returned or rejected
goods continue to conform to the representations and
warranties contained in the German Security Agreement) by
customers and goods to be returned to suppliers (DM______)
</TABLE>
<PAGE> 429
EXHIBIT N-2
Page 3
<TABLE>
<S> <C> <C>
Used inventory (DM______)
Any advance payments made by customers with respect to
inventory of the German Borrowers (DM______)
Inventory subject to any Lien other than the Liens created
under the German Security Agreement and the other applicable
German Security Documents
(DM______)
5. German Borrower Eligible Inventory
(Net Amount of No. 4) DM______
6. 40% of German Borrower Eligible Inventory DM______
7. Bally Wulff International GmbH ("BWI")
Accounts Receivable
Gross book value of all receivables of BWI arising from the
sale or lease of inventory or services by BWI in the ordinary
course of business which conform to the representations and
warranties contained in the German Security Agreement and the
other applicable German Security Documents (including,
without limitation, that outstanding Bally Gaming
International GmbH Senior Secured Loans, pledged pursuant to
the German Security Documents, shall be secured by a first
priority perfected security interest in all such receivables) DM______
Less:
Returns, discounts and claims of any nature (whether issued,
owing, granted or outstanding) (DM______)
Bill and hold (deferred shipment) and consignment
transactions (DM______)
Contracts or sales to any Affiliate (DM______)
</TABLE>
<PAGE> 430
EXHIBIT N-2
Page 4
<TABLE>
<S> <C> <C>
Without duplication, all installment or lease receivables (DM______)
where the respective account debtor has two or more
installments which are past due
All receivables from any party subject to any bankruptcy,
receivership, insolvency or like proceedings by the account
debtor (DM______)
One-third of the amount of all receivables to account debtors
outside the Federal Republic of German which would otherwise
have been included as German Eligible Receivables (DM______)
Book reserves in respect of receivables of the BWI to the
extent in excess of 20% of the gross book value of the
receivables of BWI (DM______)
8. BWI Elgible Receivables
(Net Amount of No. 7) DM______
9. 75% of BWI Elgible Receivables DM______
10. BWI Inventory
Book value of the inventory of BWI which conforms to the
representations and warranties contained in the German
Security Agreement and the other applicable German Security
Documents (and which secure outstanding Bally Gaming
International GmbH Senior Secured Loans, pledged pursuant to
the German Security Documents), which inventory is located in
the Federal Republic of Germany DM______
Less:
</TABLE>
<PAGE> 431
EXHIBIT N-2
Page 5
<TABLE>
<S> <C> <C>
Supplies (other than raw materials), goods returned or
rejected (except to the extent that such returned or rejected
goods continue to conform to the representations and
warranties contained in the German Security Agreement) by
customers and goods to be returned to suppliers
(DM______)
Used Inventory DM______
Any advance payments made by customers with respect to
inventory of BWI (DM______)
Inventory subject to any Lien other than the Liens created
under the German Security Agreement and the other applicable
German Security Documents
(DM______)
11. BWI Eligible Inventory
(Net Amount of No. 10) DM______
12. 40% of BWI Eligible Inventory DM______
13. Outstanding principal amount of Bally Gaming International
GmbH Senior Secured Loans DM______
14. Deutsche Mark Equivalent of U.S. $10 million DM______
15. Insert least of (x) the sum of Nos. 9 and 12 above, (y) No.
13 above or (z) 14 above
16. German Borrowing Base
(Sum of Nos. 3, 6 and 15) DM______
17. Total Deutsche Mark Revolving Loans and German Letter of
Credit Outstandings
DM______
18. German Borrowing Base Surplus (Deficiency)
(No. 16 minus No. 17) DM______
</TABLE>
<PAGE> 432
EXHIBIT N-2
Page 6
The undersigned hereby certifies that all of the information
provided above is true and correct as of the date first above written.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her
hand this ______ day of ___________, ____.
BALLY WULFF VERTRIEBS GMBH
By
-------------------------------------
Name:
Title:
BALLY WULFF AUTOMATEN GMBH
By
-------------------------------------
Name:
Title:
<PAGE> 433
EXHIBIT O
<PAGE> 434
EXHIBIT O
FORM OF SUBORDINATION PROVISIONS
EACH PROMISSORY NOTE EVIDENCING AN INTERCOMPANY LOAN INCURRED
BY ALLIANCE GAMING CORPORATION (THE "U.S. BORROWER") FROM ANY SUBSIDIARY OF THE
U.S. BORROWER PURSUANT TO SECTION 9.05 (viii)(h) OF THE CREDIT AGREEMENT SHALL
HAVE INCLUDED ON ITS FACE THE FOLLOWING PROVISION AND SHALL HAVE "ANNEX A TO
NOTE" ATTACHED THERETO AND MADE A PART THEREOF.
"THIS NOTE, AND THE OBLIGATIONS OF ALLIANCE GAMING CORPORATION
(THE "PAYOR") HEREUNDER, SHALL BE SUBORDINATE AND JUNIOR IN RIGHT OF
PAYMENT TO ALL SENIOR INDEBTEDNESS (AS DEFINED IN SECTION 1.07 OF
ANNEX A HERETO) ON THE TERMS AND CONDITIONS SET FORTH IN ANNEX A
HERETO, WHICH ANNEX A IS HEREIN INCORPORATED BY REFERENCE AND MADE A
PART HEREOF AS IF SET FORTH HEREIN IN ITS ENTIRETY."
<PAGE> 435
ANNEX A
Section 1.01. Subordination of Liabilities. Alliance Gaming
Corporation (the "Payor"), for itself, its successors and assigns, covenants
and agrees, and each holder of the Note to which this Annex A is attached (the
"Note") by its acceptance thereof likewise covenants and agrees, that the
payment of the principal of, interest on, and all other amounts owing in
respect of, the Note (the "Subordinated Indebtedness") is hereby expressly
subordinated, to the extent and in the manner hereinafter set forth, to the
prior payment in full in cash of all Senior Indebtedness (as defined in Section
1.07 of this Annex A). The provisions of this Annex A shall constitute a
continuing offer to all persons who, in reliance upon such provisions, become
holders of, or continue to hold, Senior Indebtedness, and such provisions are
made for the benefit of the holders of Senior Indebtedness, and such holders
are hereby made obligees hereunder the same as if their names were written
herein as such, and they and/or each of them may proceed to enforce such
provisions.
Section 1.02. Payor not to Make Payments with Respect to
Subordinated Indebtedness in Certain Circumstances. (a) Upon the maturity of
any Senior Indebtedness (including interest thereon or fees or any other
amounts owing in respect thereof), whether at stated maturity, by acceleration
or otherwise, all Obligations (as defined in Section 1.07 of this Annex A)
owing in respect thereof, in each case to the extent due and owing, shall first
be paid in full in cash, before any payment of any kind or character, whether
in cash, property, securities or otherwise, is made on account of the
Subordinated Indebtedness.
(b) In addition to the provisions set forth above, the
Payor may not, directly or indirectly, make any payment of any Subordinated
Indebtedness and may not acquire any Subordinated Indebtedness for cash or
property until all Senior Indebtedness has been paid in full in cash if (x) any
default or event of default under Section 10.01 or 10.05 of the Credit
Agreement (as defined in Section 1.07 of this Annex A) is then in existence or
would result therefrom or (y) if any other event of default under the Credit
Agreement is then in existence or would result therefrom; provided that in the
case of this clause (y) (but not in the case of preceding clause (x)) payment
shall only be prohibited if the Administrative Agent or the Required Lenders
under the Credit Agreement have specifically notified the U.S. Borrower in
writing that payments under loans made pursuant to Section 9.05(viii)(h) of the
Credit Agreement shall be prohibited during the continuance of one or more of
such events of defaults under the Credit Agreement. Each holder of the Note
hereby agrees that, so long as any such default or event of default in respect
of the Credit Agreement exists, such holder will not sue for, or otherwise take
any action to enforce the Payor's obligations to pay, amounts owing in respect
of the Note. Each holder of the Note understands and agrees that to the extent
that the payment of interest and/or principal which would otherwise be payable
under the Note may not be made by virtue of the provisions of this clause (b),
such unpaid amount shall not constitute a payment default
<PAGE> 436
ANNEX A
Page 2
under the Note and the holder of the Note may not sue for, or otherwise take
action to enforce the Payor's obligation to pay such amount, provided that such
unpaid principal or interest shall remain an obligation of the Payor to the
holder of the Note pursuant to the terms of the Note.
(c) In the event that notwithstanding the provisions of
the preceding subsections (a) and (b) of this Section 1.02, the Payor, or any
Person on behalf of the Payor, shall make any payment on account of the
Subordinated Indebtedness at a time when payment is not permitted by said
subsection (a) or (b), such payment shall be held by the holder of the Note, in
trust for the benefit of, and shall be paid forthwith over and delivered to,
the holders of Senior Indebtedness or their representative or the trustee under
the indenture or other agreement pursuant to which any instruments evidencing
any Senior Indebtedness may have been issued, as their respective interests may
appear, for application pro rata to the payment of all Senior Indebtedness
remaining unpaid to the extent necessary to pay all Senior Indebtedness in full
in cash in accordance with the terms of such Senior Indebtedness, after giving
effect to any concurrent payment or distribution to or for the holders of
Senior Indebtedness. Without in any way modifying the provisions of this Annex
A or affecting the subordination effected hereby if the hereafter referenced
notice is not given, the Payor shall give the holder of the Note prompt written
notice of any event which would prevent payments under Section 1.02(a) or (b)
hereof.
Section 1.03. Subordination to Prior Payment of all Senior
Indebtedness on Dissolution, Liquidation or Reorganization of the Payor. Upon
any distribution of assets of the Payor, upon dissolution, winding up,
liquidation or reorganization of the Payor (whether in bankruptcy, insolvency
or receivership proceedings or upon an assignment for the benefit of creditors
or otherwise):
(a) the holders of all Senior Indebtedness shall first be
entitled to receive payment in full in cash of all Senior Indebtedness
(including, without limitation, post-petition interest at the rate
provided in the documentation with respect to such Senior
Indebtedness, whether or not such post-petition interest is an allowed
claim against the debtor in any bankruptcy or similar proceeding)
before the holder of the Note is entitled to receive any payment of
any kind or character on account of the Subordinated Indebtedness;
(b) any payment or distributions of assets of the Payor
of any kind or character, whether in cash, property or securities to
which the holder of the Note would be entitled except for the
provisions of this Annex A, shall be paid by the liquidating trustee
or agent or other person making such payment or distribution,
<PAGE> 437
ANNEX A
Page 3
whether a trustee in bankruptcy, a receiver or liquidating trustee or
other trustee or agent, directly to the holders of Senior Indebtedness
or their representative or representatives, or to the trustee or
trustees under any indenture under which any instruments evidencing
any such Senior Indebtedness may have been issued, to the extent
necessary to make payment in full in cash of all Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness; and
(c) in the event that, notwithstanding the foregoing
provisions of this Section 1.03, any payment or distribution of assets
of the Payor of any kind or character, whether in cash, property or
securities, shall be received by the holder of the Note on account of
Subordinated Indebtedness before all Senior Indebtedness is paid in
full in cash, such payment or distribution shall be received and held
in trust for and shall be paid over to the holders of the Senior
Indebtedness remaining unpaid or unprovided for or their
representative or representatives, or to the trustee or trustees under
any indenture under which any instruments evidencing any of such
Senior Indebtedness may have been issued, for application to the
payment of such Senior Indebtedness until all such Senior Indebtedness
shall have been paid in full in cash, after giving effect to any
concurrent payment or distribution to the holders of such Senior
Indebtedness.
Without in any way modifying the provisions of this Annex A or
affecting the subordination effected hereby if the hereafter referenced notice
is not given, the Payor shall give prompt written notice to the holder of the
Note of any dissolution, winding up, liquidation or reorganization of the Payor
(whether in bankruptcy, insolvency or receivership proceedings or upon
assignment for the benefit of creditors or otherwise).
Section 1.04. Subrogation. Subject to the prior payment in
full in cash of all Senior Indebtedness, the holder of the Note shall be
subrogated to the rights of the holders of Senior Indebtedness to receive
payments or distributions of assets of the Payor applicable to the Senior
Indebtedness until all amounts owing on the Note shall be paid in full, and for
the purpose of such subrogation no payments or distributions to the holders of
the Senior Indebtedness by or on behalf of the Payor or by or on behalf of the
holder of the Note by virtue of this Annex A which otherwise would have been
made to the holder of the Note shall, as between the Payor, its creditors other
than the holders of Senior Indebtedness, and the holder of the Note, be deemed
to be payment by the Payor to or on account of the Senior Indebtedness, it
being understood that the provisions of this Annex A are and are intended
solely or the purpose of defining the relative rights of the holder of the
Note, on the one hand, and the holders of the Senior Indebtedness, on the other
hand.
<PAGE> 438
ANNEX A
Page 4
Section 1.05. Obligation of the Payor Unconditional. Nothing
contained in this Annex A or in the Note is intended to or shall impair, as
between the Payor and the holder of the Note, the obligation of the Payor,
which is absolute and unconditional, to pay to the holder of the Note the
principal of and interest on the Note as and when the same shall become due and
payable in accordance with their terms, or is intended to or shall affect the
relative rights of the holder of the Note and creditors of the Payor other
than the holders of the Senior Indebtedness, nor shall anything herein or
therein prevent the holder of the Note from exercising all remedies otherwise
permitted by applicable law upon an event of default under the Note, subject to
the rights, if any, under this Annex A of the holders of Senior Indebtedness in
respect of cash, property, or securities of the Payor received upon the
exercise of any such remedy. Upon any distribution of assets of the Payor
referred to in this Annex A, the holder of the Note shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction in which
such dissolution, winding up, liquidation or reorganization proceedings are
pending, or a certificate of the liquidating trustee or agent or other person
making any distribution to the holder of the Note, for the purpose of
ascertaining the persons entitled to participate in such distribution, the
holders of the Senior Indebtedness and other indebtedness of the Payor, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Annex A.
Section 1.06. Subordination Rights not Impaired by Acts or
Omissions of Payor or Holders of Senior Indebtedness. No right of any present
or future holders of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Payor or by any act or failure to act by any
such holder, or by any noncompliance by the Payor with the terms and provisions
of the Note, regardless of any knowledge thereof which any such holder may have
or be otherwise charged with. The holders of the Senior Indebtedness may,
without in any way affecting the obligations of the holder of the Note with
respect hereto, at any time or from time to time and in their absolute
discretion, change the manner, place or terms of payment of, change or extend
the time of payment of, or renew or alter, any Senior Indebtedness or amend,
modify or supplement any agreement or instrument governing or evidencing such
Senior Indebtedness or any other document referred to therein, or exercise or
refrain from exercising any other of their rights under the Senior Indebtedness
including, without limitation, the waiver of default thereunder and the release
of any collateral securing such Senior Indebtedness, all without notice to or
assent from the holder of the Note.
Section 1.07. Definitions. As used in this Annex, the terms
set forth below shall have the respective meanings provided below:
<PAGE> 439
ANNEX A
Page 5
"Borrower" shall have the meaning provided in the Credit
Agreement.
"Credit Agreement" shall mean the Credit Agreement, dated as
of August 8, 1997, among Alliance Gaming Corporation, Bally Wulff Vertriebs
GmbH, Bally Wulff Automaten GmbH, the Lenders party thereto from time to time,
and Credit Suisse First Boston, as Administrative Agent, as the same may be
amended, modified, extended, renewed, restated, supplemented, restructured or
refinanced from time to time, and including any agreement extending the
maturity of, refinancing or restructuring all or any portion of, the
indebtedness under such agreement or any successor agreements; provided that
with respect to any agreement providing for the refinancing of indebtedness
under the Credit Agreement, such agreement shall only be treated as, or as part
of, the Credit Agreement hereunder if (i) either (A) all obligations under the
Credit Agreement being refinanced shall be paid in full at the time of such
refinancing, and all commitments and letters of credit issued pursuant to the
refinanced Credit Agreement shall have terminated in accordance with their
terms or (B) the Required Lenders shall have consented in writing to the
refinancing indebtedness being treated, along with their indebtedness, as
indebtedness pursuant to the Credit Agreement, (ii) the refinancing
indebtedness shall be permitted to be incurred under the Credit Agreement being
refinanced (if such Credit Agreement is to remain outstanding) and (iii) a
notice to the effect that the refinancing indebtedness shall be treated as
issued under the Credit Agreement shall be delivered by the U.S. Borrower to
the Administrative Agent.
"Credit Documents" shall have the meaning provided in the
Credit Agreement.
"Interest Rate Protection Agreement" shall have the meaning
provided in the Credit Agreement.
"Lenders" shall have the meaning provided in the Credit
Agreement.
"Obligation" shall mean any principal, interest, premium,
penalties, fees, indemnities and other liabilities and obligations payable
under the documentation governing any Senior Indebtedness (including, without
limitation, all interest after the commencement of any bankruptcy, insolvency,
receivership or similar proceeding at the rate provided in the governing
documentation, whether or not such interest is an allowed claim in such
proceeding).
"Other Creditors" shall mean the Lenders party from time to
time to the Credit Agreement, and their affiliates and their respective
subsequent assigns, if any, and
<PAGE> 440
ANNEX A
Page 6
any other institution which participates with such Lenders or affiliates in the
extension of Interest Rate Protection Agreement or Other Hedging Agreements and
their subsequent assigns, if any, in all such cases in their capacity as
creditors with respect to Interest Rate Protection Agreements or Other Hedging
Agreements.
"Other Hedging Agreement" shall have the meaning provided in
the Credit Agreement.
"Required Lenders" shall have the meaning provided in the
Credit Agreement.
"Senior Indebtedness" shall mean all Obligations of (i) each
Borrower under the Credit Agreement and the other Credit Documents and any
renewal, extension, restatement, refinancing or refunding thereof; and (ii)
each Borrower in respect of all Interest Rate Protection Agreements and Other
Hedging Agreements with Other Creditors.
"Subsidiaries" shall have the meaning provided in the Credit
Agreement.
"U.S. Borrower" shall have the meaning provided in the Credit
Agreement.
Section 1.08. Miscellaneous. If, at any time, all or part of
any payment with respect to Senior Indebtedness theretofore made by the Payor
or any other Person is rescinded or must otherwise be returned by the holders
of Senior Indebtedness for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy or reorganization of the Payor or such
other Persons), the subordination provisions set forth herein shall continue to
be effective or be reinstated, as the case may be, all as though such payment
had not been made.
<PAGE> 441
EXHIBIT P
<PAGE> 442
EXHIBIT P
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
Date __________, 19__
Reference is made to the Credit Agreement described in Item 2
of Annex I hereto (as such Credit Agreement may hereafter be amended,
supplemented or otherwise modified from time to time, the "Credit Agreement").
Unless defined in Annex I hereto, terms defined in the Credit Agreement are
used herein as therein defined. ___________ (the "Assignor") and __________
(the "Assignee") hereby agree as follows:
1. The Assignor hereby sells and assigns to the Assignee
without recourse and without representation or warranty (other than as
expressly provided herein), and the Assignee hereby purchases and assumes from
the Assignor, that interest in and to all of the Assignor's rights and
obligations under the Credit Agreement as of the date hereof which represents
the percentage interest specified in Item 4 of Annex I hereto (the "Assigned
Share") of all of the outstanding rights and obligations under the Credit
Agreement relating to the facilities listed in Item 4 of Annex I hereto,
including, without limitation, [(p) in the case of any assignment of
all or any portion of the Assignor's U.S. Borrower Tranche A Loan Commitment,
all rights and obligations with respect to the Assigned Share of such U.S.
Borrower Tranche A Term Loan Commitment] [(q) in the case of any assignment of
all or any portion of the Assignor's German Borrower Tranche A Term Loan
Commitment, all rights and obligations with respect to the Assigned Share of
such German Borrower Tranche A Term Loan Commitment] [(r) in the case of any
assignment of all or any portion of the Assignor's Delayed Draw Term Loan
Commitment, all rights and obligations with respect to the Assigned Share of
such Delayed Draw Term Loan Commitment] [(s) in the case of any assignment of
all or any portion of the Assignor's Tranche B Term Loan Commitment, all rights
and obligations with respect to the Assigned Share of such Tranche B Term Loan
Commitment] [(t) in the case of any assignment of all or any portion of the
Assignor's Tranche C Term Loan Commitment, all rights and obligations with
respect to the Assigned Share of such Tranche C Term Loan Commitment](1) (u) in
the case of any assignment of all or any portion of the Assignor's outstanding
U.S. Borrower Tranche A Term Loans, all rights and obligations with respect to
the Assigned Share of such outstanding U.S. Borrower Tranche A Term Loans, (v)
in the case of any assignment of
____________________
(1) Insert appropriate bracketed language prior to the U.S. Borrower
Tranche A Term Loan Commitment Termination Date, German Borrower Tranche
A Term Loan Termination Commitment Date, Delayed Draw Term Loan Commitment
Termination Date, Tranche B Term Loan Commitment Termination Date or the
Tranche C Term Loan Commitment Termination Date, as the case may be.
<PAGE> 443
EXHIBIT P
Page 2
all or any portion of the Assignor's outstanding German Borrower Tranche A Term
Loans, all rights and obligations with respect to the Assigned Share of such
outstanding German Borrower Tranche A Term Loans, (w) in the case of any
assignment of all or any portion of the Assignor's outstanding Delayed Draw
Term Loans, all rights and obligations with respect to the Assigned Share of
such outstanding Delayed Draw Term Loans, (x) in the case of any assignment
of all or any portion of the Assignor's outstanding Tranche B Term Loans,
all rights and obligations with respect to the Assigned Share of such
outstanding Tranche B Term Loans, (y) in the case of any assignment of all
or any portion of the Assignor's outstanding Tranche C Term Loans, all
rights and obligations with respect to the Assigned Share of such outstanding
Tranche C Term Loans, (z) in the case of any assignment of all or any portion
of the Assignor's outstanding Total Revolving Loan Commitment, all rights and
obligations with respect to (i) the Assigned Share of such outstanding Total
Revolving Loan Commitment, (ii) the Assigned Share or Shares, as the case
may be, of the related German Revolving Loan Sub-Commitment and/or Non-German
Revolving Loan Sub-Commitment (it being understood that the aggregate amount
of the assigned portions of the German Revolving Loan Sub-Commitment and/or
Non-German Revolving Loan Sub-Commitment must equal the amount of the assigned
Revolving Loan Commitment) and (iii) any outstanding Revolving Loans and
Letters of Credit, in each case, based on the RL Percentage and German RL
Percentage of the respective Assignee after giving effect to such assignments
and as determined in accordance with the Credit Agreement.
2. The Assignor (i) represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim; (ii) 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 other Credit Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or the other Credit Documents or any other instrument or document
furnished pursuant thereto; and (iii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the U.S.
Borrower or any of its Subsidiaries or the performance or observance by the
U.S. Borrower or any of its Subsidiaries of any of their respective obligations
under the Credit Agreement or the other Credit Documents to which they are a
party or any other instrument or document furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of
the Credit Agreement and the other Credit Documents, together with copies of
the financial statements referred to therein and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Assumption
<PAGE> 444
EXHIBIT P
Page 3
Agreement; (ii) agrees that it will, independently and without reliance upon
the Administrative Agent, the Assignor 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; (iii) confirms that it is an Eligible Transferee under Section
13.04(b) of the Credit Agreement; (iv) appoints and authorizes the
Administrative Agent and the Collateral Agent to take such action as agent on
its behalf and to exercise such powers under the Credit Agreement and the other
Credit Documents as are delegated to the Administrative Agent and the
Collateral Agent, by the terms thereof, together with such powers as are
reasonably incidental thereto; [and] (v) agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Credit Agreement and the other Credit Documents are required to be performed by
it as a Lender; and (vi) to the extent legally entitled to do so, attaches the
forms described in Section 13.04(b) of the Credit Agreement](2).
4. Following the execution of this Assignment and Assumption
Agreement by the Assignor and the Assignee, an executed original hereof
(together with all attachments) will be delivered to the Administrative Agent.
The effective date of this Assignment and Assumption Agreement shall be the
date of execution hereof by the Assignor and the Assignee, the receipt of the
consent of the Administrative Agent and the U.S. Borrower to the extent
required by Section 13.04(b) of the Credit Agreement, the receipt by the
Administrative Agent of the administrative fee referred to in such Section
13.04(b) and the recordation of the assignment effected hereby on the Register
by the Administrative Agent as provided in Section 13.15 of the Credit
Agreement, or such later date, if any, which may be specified in Item 5 of
Annex I hereto (the "Settlement Date").
5. Upon the delivery of a fully executed original hereof to
the Administrative Agent, as of the Settlement Date, (i) the Assignee shall be
a party to the Credit Agreement and, to the extent provided in this Assignment
and Assumption Agreement, have the rights and obligations of a Bank thereunder
and under the other Credit Documents and (ii) the Assignor shall, to the extent
provided in this Assignment and Assumption Agreement, relinquish its rights and
be released from its obligations under the Credit Agreement and the other
Credit Documents.
6. It is agreed that the Assignee shall be entitled to (w)
all interest on the Assigned Share of the Loans at the rates specified in Item
6 of Annex I; (x) all Term Loan Commitment Commission (if applicable) on the
Assigned Share of the Total Term Loan Commitment at the rate specified in Item
7 of Annex I hereto; (y) all Revolving Loan
____________________
(2) Include if the Assignee is organized under the laws of a jurisdiction
outside of the United States.
<PAGE> 445
EXHIBIT P
Page 4
Commitment Commission (if applicable) at the rate specified in Item 8 of Annex
I hereto; and (z) all Letter of Credit Fees (if applicable) on the Assignee's
participation in all Letters of Credit at the rate specified in Item 9 of Annex
I hereto, which, in each case, accrue on and after the Settlement Date, such
interest and, if applicable, Term Loan Commitment Commission, Revolving Loan
Commitment Commission and Letter of Credit Fees, to be paid by the
Administrative Agent directly to the Assignee. It is further agreed that all
payments of principal made on the Assigned Share of the Loans which occur on
and after the Settlement Date will be paid directly by the Administrative Agent
to the Assignee. Upon the Settlement Date, the Assignee shall pay to the
Assignor an amount specified by the Assignor in writing which represents the
Assigned Share of the principal amount of the respective Loans made by the
Assignor pursuant to the Credit Agreement which are outstanding on the
Settlement Date. The Assignor and the Assignee shall make all appropriate
adjustments in payments under the Credit Agreement for periods prior to the
Settlement Date directly between themselves.
7. THIS ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 446
EXHIBIT P
Page 5
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Assignment and Assumption
Agreement, as of the date first above written, such execution also being made
on Annex I hereto.
Accepted this _____ day [NAME OF ASSIGNOR]
of ____________, 19__ as Assignor
By_____________________________
Title:
[NAME OF ASSIGNEE]
as Assignee
By_____________________________
Title:
[Acknowledged and Agreed as of _________ ___, 19__.
CREDIT SUISSE FIRST BOSTON, as Administrative Agent
By__________________________
Title:
By__________________________
Title: ](3)
[ALLIANCE GAMING CORPORATION
By__________________________
Title: ](4)
____________________
(3) The consent of the Administrative Agent is required for assignments
pursuant to Section 13.04(b)(y) of the Credit Agreement.
(4) At any time when no Event of Default is in existence, and when no
Default exists pursuant to Section 10.01 or 10.05 of the Credit Agreement,
the approval of the U.S. Borrower is required with respect to all assignments,
except with respect to assignments of Loans, but not of Commitments, pursuant
to Section 13.04(b)(x) of the Credit Agreement.
<PAGE> 447
ANNEX I
ANNEX FOR ASSIGNMENT AND ASSUMPTION AGREEMENT
1. Borrowers: Alliance Gaming Corporation
Bally Wulff Vertriebs GmbH
Bally Wulff Automaten GmbH
2. Name and Date of Credit Agreement:
Credit Agreement, dated as of August 8, 1997, among Alliance Gaming
Corporation, Bally Wulff Vertriebs GmbH, Bally Wulff Automaten GmbH,
the Lenders from time to time party thereto, and Credit Suisse First
Boston, as Administrative Agent, as amended, modified or supplemented
to the date hereof.
3. Date of Assignment Agreement:
4. Amounts (as of date of item #3 above):
<TABLE>
<CAPTION>
Outstanding
Outstanding Principal of Outstanding Outstanding Outstanding
Principal of U.S. German Borrower Principal of Principal Principal of
Borrower Tranche A Tranche A Term Delayed Draw of Tranche B Tranche C Term
Term Loans Loans Term Loans Term Loans Loans
<S> <C> <C> <C> <C> <C>
a. Aggregate Amount $__________ DM__________ $__________ $__________ $___________
for Banks
b. Assigned Share __________% __________% __________% __________% __________%
c. Amount of Assigned $__________ DM__________ $__________ $__________ $___________
Share
</TABLE>
<TABLE>
<CAPTION>
Non-German
German Revolving
Revolving Loan Revolving Loan Loan Sub-
Commitment Sub-Commitment Commitment
<S> <C> <C> <C>
a. Aggregate Amount
for Banks $__________ DM__________ $__________
b. Assigned Share __________% __________% __________%
c. Amount of Assigned Share $__________ DM__________ $__________
</TABLE>
<TABLE>
<CAPTION>
[U.S. Borrower
Tranche A Term German Borrower Tranche B Tranche C
Loan Tranche A Term Term Loan Term Loan
Commitment Loan Commitment Commitment Commitment
<S> <C> <C> <C> <C>
a. Aggregate Amount for Banks $__________ DM__________ $__________ $__________
b. Assigned Share(1) __________% __________% __________% __________%
c. Amount of Assigned Share $__________ DM__________ $__________ $__________
</TABLE>
<TABLE>
<CAPTION>
Delayed Draw Term
Loan
Commitment] (2)
<S> <C>
a. Aggregate Amount for $__________
Banks
b. Assigned Share __________%
c. Amount of Assigned Share $__________]
</TABLE>
__________________________________
(1) Percentage taken to 12 decimal places.
(2) Include to the extent such commitments have not terminated.
<PAGE> 448
Annex I
Page 2
5. Settlement Date:
6. Rate of Interest As set forth in Section 1.08 to the Assignee:
of the Credit Agreement (unless otherwise agreed to by the Assignor
and the Assignee)(3)
7. Term Loan As set forth in Section 3.01(a) of the
Commitment: Credit Agreement (unless otherwise
Commission: agreed to by the Assignor and the Assignee)(4)
8. Revolving Loan As set forth in Section 3.01(b) of
Commitment the Credit Agreement (unless otherwise
Commission: agreed to by the Assignor and the Assignee)(5)
9. Letter of Credit As set forth in Section 3.01(c) of the
Fees to the Credit Agreement (unless otherwise
Assignee: agreed to by the Assignor and the Assignee)(6)
__________________________________
(3) The Borrowers and the Administrative Agent shall direct the entire amount
of the interest to the Assignee at the rate set forth in Section 1.08 of the
Credit Agreement, with the Assignor and Assignee effecting the agreed upon
sharing of the interest through payments by the Assignee to the Assignor.
(4) Insert "Not Applicable" in lieu of text if no portion of the Total Term
Loan Commitment is being assigned. Otherwise, the U.S. Borrower and the
Administrative Agent shall direct the entire amount of the Term Loan
Commitment Commission to the Assignee at the rate set forth in Section
3.01(a) of the Credit Agreement, with the Assignor and the Assignee
effecting the agreed upon sharing of Term Loan Commitment Commission
through payment by the Assignee to the Assignor.
(5) Insert "Not Applicable" in lieu of text if no portion of the Total
Revolving Loan Commitment is being assigned. Otherwise, the Borrowers and the
Administrative Agent shall direct the entire amount of the Revolving Loan
Commitment Commission to the Assignee at the rate set forth in Section
3.01(b) of the Credit Agreement, with the Assignor and the Assignee
effecting the agreed upon sharing of the Revolving Loan Commitment
Commission through payment by the Assignee to the Assignor.
(6) Insert "Not Applicable" in lieu of text if no portion of the Total
Revolving Loan Commitment is being assigned. Otherwise, the Borrowers and the
Administrative Agent shall direct the entire amount of the Letter of Credit
Fees to the Assignee at the rate set forth in Section 3.01(c) of the Credit
Agreement, with the Assignor and the Assignee effecting the agreed upon
sharing of Letter of Credit Fees through payment by the Assignee to the
Assignor.
<PAGE> 449
Annex I
Page 3
10. Notice:
ASSIGNOR:
_________________________
_________________________
_________________________
_________________________
Attention:
Telephone:
Telecopier:
Reference:
ASSIGNEE:
_________________________
_________________________
_________________________
_________________________
Attention:
Telephone:
Telecopier:
Reference:
Payment Instructions:
ASSIGNOR:
_________________________
_________________________
_________________________
_________________________
Attention:
Reference:
ASSIGNEE:
_________________________
_________________________
_________________________
_________________________
Attention:
Reference:
<PAGE> 450
Annex I
Page 4
Accepted and Agreed:
[NAME OF ASSIGNEE] [NAME OF ASSIGNOR]
By_____________________ By_______________________________
_____________________ _______________________________
(Print Name and Title) (Print Name and Title)
<PAGE> 1
EXHIBIT 10.70
SEPARATION AGREEMENT
THIS SEPARATION AGREEMENT is made and entered into as of this 5th day of
November, 1996, by and between STEVE GREATHOUSE, residing at 7140 Darby Avenue,
Las Vegas, Nevada 89117 (the "Executive"), and ALLIANCE GAMING CORPORATION, a
Nevada corporation, having its principal offices at 6601 South Bermuda Road, Las
Vegas, Nevada 89119 (the "Corporation").
W I T N E S S T H:
WHEREAS, the Executive has been employed by the Corporation as its
President and Chief Executive Officer and in other capacities; and
WHEREAS, the Executive and the Corporation desire to settle fully and
finally all matters between them to date, including without limitation, any
issues that might arise out of the Executive's employment or the termination of
his employment;
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, intending to be legally bound hereby,
agree as follows:
1. EMPLOYMENT STATUS. The Executive and the Corporation agree that on the
earlier to occur of (a) December 31, 1996, (b) the date on which a successor
chief executive officer is named by the Corporation, or (c) a date otherwise
determined by the Board of Directors of the Corporation in its discretion (in
each case, the "Termination Date"), the Executive shall cease to be the
President and Chief Executive Officer of the Corporation, and shall cease all
other officer and employee positions with the Corporation and its subsidiaries
and affiliates. The Executive also hereby agrees to resign, effective on the
Termination Date, his membership on the Board of Directors (and all Board of
Director committees) of the Corporation and its subsidiaries and affiliates.
2. SEVERANCE BENEFITS.
(a) CASH REMUNERATION. The Corporation shall (i) continue to pay to
the Executive his base salary in the amount of $400,000 per annum up to and
including the Termination Date, (ii) pay the Executive, within five days after
the Termination Date, an additional amount equal to $500,000 less the aggregate
amount paid to the Executive under clause (i) above for the period commencing on
the date of this Agreement and ending on the Termination Date, and (iii) pay any
expense reimbursement amounts accrued through
1
<PAGE> 2
the Termination Date, in the case of clauses (i) and (iii) above, at the time
such payments would otherwise have been due and payable under the Employment
Agreement, dated as of August 15, 1994 with the Corporation (the "Employment
Agreement").
(b) The Corporation also shall provide to Executive the following
additional severance benefits, the costs of which are not deducted from or
offset against any amounts otherwise payable to Executive as severance benefits
hereunder.
(i) HEALTH INSURANCE COVERAGE. The Corporation at its cost
shall provide Executive and his family with the health insurance benefits
and coverage (including medical, dental and vision) that Executive and his
family enjoyed as of the Termination Date, until August 14, 1997, at which
time Executive and his family shall be entitled to elect COBRA if they are
eligible under COBRA.
(ii) VACATION. Executive is entitled to and may take before
December 31, 1996 six weeks of accumulated paid vacation. If Executive
elects not to take six weeks of accumulated paid vacation before December
15, 1996, the Corporation shall pay him for his accumulated vacation in
cash on December 31, 1996.
(iii) LIFE INSURANCE. The Corporation shall continue the
payment of the premiums on the life insurance policy covering Executive's
life as it has during his employment, until August 14, 1997, and
thereafter fully cooperate with Executive if Executive elects to transfer
ownership of the policy to him or his designee.
(iv) STOCK OPTIONS. Notwithstanding any contrary provision in
the August 15, 1994 Employment Agreement or in any other stock option plan
of the Corporation, including the 1991 Incentive Stock Option Plan, all
Executive's unvested Employment Options (as defined in the Employment
Agreement) shall vest and become exercisable as of the Termination Date.
In addition, such Employment Options shall remain exercisable until August
29, 2001.
(v) INCENTIVE WARRANTS. Executive remains entitled to the
Incentive Warrants under Section 4(c) of the Employment Agreement and
nothing in this Agreement is intended to limit or reduce Executive's
rights thereto.
(vi) EXECUTIVE SECRETARY SEPARATION ALLOWANCE. If the
employment of Executive's secretary terminates between December 31, 1996
and June 15, 1997, the Corporation at its cost will pay and/or provide as
severance
2
<PAGE> 3
benefits to Executive's secretary: continuation of her current salary and
health care coverage for 15 weeks after her termination, after which she
will be entitled to COBRA if eligible.
(c) Neither party shall have any further liability or obligation to
the other, except as provided in this Agreement or letter agreement, of even
date herewith, between the Executive and the Corporation. The Executive and the
Corporation each agree that the covenants in Section 10 of the Employment
Agreement shall be of no further force and effect following the Termination
Date.
3. COOPERATION/CONSULTING. The Executive agrees to make himself available
during the first week of work performed by any succeeding chief executive
officer to answer questions, introduce staff and provide a general overview of
the gaming industry. The Corporation shall retain the Executive as a consultant
for one year after the Termination Date and shall pay the Executive a consulting
fee equal to $225,000 (payable within five days after the Termination Date and
in addition to any Severance Benefits under Section 2 hereof). The Executive or
the Corporation shall have the right to terminate the consulting arrangement at
any time for any reason.
4. CONFIDENTIAL INFORMATION AND NON-DISPARAGEMENT.
(a) In accordance with NRS 600A.010 et seq. (the so-called Uniform
Trade Secrets Act), the Executive shall hold in a fiduciary capacity for the
benefit of the Corporation and its stockholders all secret, confidential or
proprietary information, knowledge or data relating to the Corporation (and any
of its subsidiaries or affiliates), which shall have been obtained by the
Executive during or by reason of his employment by the Corporation. During and
after the Executive's employment with the Corporation, the Executive shall not,
without the prior written consent of the Corporation, communicate or divulge any
such information, knowledge or data to any person or entity other than the
Corporation (or such applicable subsidiaries or affiliates) and those designated
by them which would result in any misappropriation under and as defined in such
Act, except that, while employed by the Corporation or acting as a consultant to
it, in furtherance of the business and for the benefit of the Corporation, the
Executive may provide confidential information as appropriate to attorneys,
accountants, financial institutions or other persons or entities engaged in
business with the Corporation from time to time.
(b) Each of the parties hereto agrees that from and after the date
of this Agreement, neither shall, publicly or privately, disparage or make any
statements (written or oral) that would impugn the integrity, acumen (business
or otherwise), ethics or business practices, of the other and/or the directors,
officers, employees, shareholders
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and/or affiliates of the other, except, in each case, to the extent (but solely
to the extent) necessary (i) in any judicial or arbitral action to enforce the
provisions of this Agreement, or (ii) in connection with any judicial,
regulatory or administrative proceeding to the extent required by applicable
law. For purposes of this Section 4(b), parties include officers and directors
of the Corporation as of the date of this Agreement and thereafter.
5. INDEMNIFICATION. To the fullest extent provided by applicable law, the
Corporation shall indemnify and hold the Executive harmless against any and all
expenses, liabilities and losses, including without limitation, reasonable
attorneys' fees and costs, incurred or suffered by him in connection with his
service as officer, director, employee or consultant of the Corporation. This
indemnification and hold harmless by the Corporation, to the fullest extent
provided by applicable law, covers all acts or omissions of Executive to and
including the Termination Date and, thereafter, Executive's acts and omissions
as consultant under Section 3 hereof, except in any case to the extent of the
Executive's willful misconduct.
6. ANNOUNCEMENT. The parties agree that neither will make any public
announcement or issue any press release concerning Executive's termination from
the Corporation, except the announcement attached hereto as Exhibit A which has
been reviewed and approved by the parties, and except as otherwise required by
law or compelled by any governmental or regulatory body having jurisdiction.
7. AGREEMENT CONFIDENTIAL. The Executive represents and agrees that,
unless required by any gaming regulatory authority, legal process, or in order
to comply with applicable legal requirements, or as is reasonably necessary in
connection with any adversarial process between the Corporation and the
Executive, he will keep the terms of this Agreement completely confidential, and
that he will not hereafter disclose any information concerning this Agreement to
anyone except his financial, legal or tax advisor(s), his accountants, and his
immediate family; provided that these individuals agree to keep said information
confidential and not disclose it to others; provided, further, the fact that the
parties have entered into a separation agreement is not deemed confidential, nor
is the disclosure that the parties have entered into a separation agreement a
breach of this Section 7. The Corporation represents and agrees that, unless
required by any gaming regulatory authority, legal process or in order to comply
with applicable legal requirements, or as is reasonably necessary in connection
with any adversarial process between the Corporation and the Executive, it will
keep the terms of this Agreement completely confidential, and that it will not
hereafter disclose any information concerning this Agreement to anyone except
its financial, legal or tax advisor(s), its accountants, its directors, and
those employees of the Corporation who have a need to know about its terms;
provided that these individuals agree to keep said information confidential and
not
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disclose it to others and the fact that the parties have entered into a
separation agreement is not deemed confidential, nor is the disclosure that the
parties have entered into a separation agreement a breach of this Section 7; and
provided further that the Executive shall have the opportunity to review any
proposed public disclosure pursuant to applicable legal requirements with
respect to any of the terms of this Agreement.
8. STANDSTILL RESTRICTIONS. For a period of one year from the Termination
Date (Restricted Period), except as specifically requested in writing by the
Corporation, the Executive, singly or with any other person or directly or
indirectly, shall not propose, enter into, or agree to enter into, or encourage
any other person to propose, enter into, or agree to enter into (i) any form of
business combination, acquisition or other transaction relating to the
Corporation or (ii) any form of restructuring, recapitalization or similar
transaction with respect to the Corporation. Furthermore, during the Restricted
Period, except as specifically requested in writing by the Corporation, the
Executive shall not, singly or with any other person or directly or indirectly,
(1) acquire, or offer, propose or agree to acquire, by tender offer, purchase or
otherwise, any voting securities of the Corporation except through the exercise
of stock options or incentive warrants held or acquired during his employment,
(2) make, or in any way participate in, any solicitation of proxies or written
consents with respect to voting securities of the Corporation (it being
understood that the mere execution of a proxy or written shareholder consent
relating to the shares owned by the Executive shall not be treated as
constituting participation in such a solicitation), (3) become a participant in
any election contest with respect to the Corporation, (4) seek to influence any
person with respect to the voting or disposition of any voting securities of the
Corporation, (5) demand a copy of the Corporation's list of stockholders or its
other books and records, (6) participate in or encourage the formation of any
partnership, syndicate or other group that owns or seeks or offers to acquire
beneficial ownership of any voting securities of the Corporation or that seeks
to affect control of the Corporation or for the purpose of circumventing any
provision of this Agreement, (7) propose or support any director or slate of
directors for nomination, appointment or election to the Board of Directors of
the Corporation (it being understood that the mere execution of a proxy or
written shareholder consent relating to the shares owned by the Executive shall
not be treated as constituting such support), or (8) otherwise act to seek or to
offer to control or influence, in any manner, the management, Board of Directors
or policies of the Corporation. Furthermore, during the Restricted Period, the
Executive shall not directly or indirectly (i) solicit for employment any of the
current directors, officers or managers of the Corporation or (ii) induce any
such directors, officers or managers to terminate his or her employment with the
Corporation, except that immediately preceding clauses (i) and (ii) do not apply
to Executive's secretary or to the Senior Vice President/General Counsel of the
Corporation.
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9. RELEASES.
(a) In consideration of the payments and benefits to the Executive
under this Agreement and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by the Executive, the Executive
knowingly, voluntarily and unconditionally hereby forever waives, releases and
discharges, and covenants never to sue on, any and all claims, liabilities,
causes of actions, judgments, orders, assessments, penalties, fines, expenses
and costs (including without limitation attorneys' fees) and/or suits of any
kind arising out of any actions, events or circumstances before the date of
execution of this Agreement ("Claims") which the Executive has, ever had or may
have, or which the Executive's heirs, executors, administrators and assigns, or
any of them hereafter can, shall or may have, including, without limitation, any
Claims arising in whole or in part from the Executive's employment or the
termination of the Executive's employment with the Corporation or the manner of
said termination; provided, however, that this Section 9 shall not apply to any
of the obligations of the Corporation (including the parties under Section 4(b)
hereof), specifically provided for in this Agreement. This Agreement is intended
as a full and final settlement and compromise of each, every and all Claims of
every kind and nature, whether known or unknown, which have been or could be
asserted against the Corporation and/or any of its parent corporations,
subsidiaries, shareholders, officers, directors, agents, affiliates, and
employees, past or present, and their respective heirs, successors and assigns
(collectively, the "Releasees"), including, without limitation --
(1) any Claims arising out of any employment agreement or
other contract (including, without limitation, the Employment Agreement),
side-letter, resolution, promise or understanding of any kind, whether
written or oral or express or implied; and
(2) any Claims arising under any federal, state, or local
civil rights, human rights, anti-discrimination, labor, employment,
contract or tort law, rule, regulation, order or decision, including,
without limitation, the Family and Medical Leave Act, the Employee
Retirement Income Security Act of 1974, the Americans with Disabilities
Act of 1990, 42 U.S.C. Sections 12101 et seq., and Title VII of the
Civil Rights Act of 1964, 42 U.S.C. Sections 2000 et seq., and as
each of these laws have been or will be amended,
except that to the extent that any governmental authority or other third party,
i.e., other than one of the Releasees, files a charge or institutes an
investigation, lawsuit or any proceeding against the Executive based on any
event, occurrence or omission during the period of the Executive's employment or
consulting relationship with the Corporation, in
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which case the Executive will be permitted to implead or bring a court action
against the Corporation and/or any of the Releasees for indemnification as
provided under this Agreement, to the extent provided by applicable law.
(b) In consideration of the obligations of the Executive under this
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the Corporation, the Corporation
knowingly, voluntarily and unconditionally hereby forever waives, releases and
discharges, and covenants never to sue on, any and all Claims which the
Corporation has, ever had or may have, including, without limitation, any Claims
arising in whole or in part from the Executive's employment or the termination
of the Executive's employment with the Corporation or the manner of said
termination; provided, however, that this Section 9 shall not apply to any of
the obligations of the Executive specifically provided for in this Agreement.
This Agreement is intended as a full and final settlement and compromise of
each, every and all Claims of every kind and nature, whether known or unknown,
which have been or could be asserted against the Executive and his respective
heirs, successors and assigns.
(c) Notwithstanding anything to the contrary in this Section 9, the
Executive does not release any claim he may have under any employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended, in
which he was a participant during his employment with the Corporation for the
payment of a benefit thereunder to which he would be entitled upon his
termination of employment on the Termination Date in accordance with the terms
of such plan.
(d) The Executive understands that this Agreement affects
significant rights and represents and agrees that he has carefully read and
fully understands all of the provisions of this Agreement, that he is
voluntarily entering into this Agreement, and that he has been advised to
consult with and has in fact consulted with legal counsel before entering into
this Agreement.
(e) This Agreement does not constitute any admission of wrongdoing,
or evidence thereof, on the part of any of the parties hereto or the Releasees.
Except as required by court order, any gaming regulatory authority, or to
enforce the terms of this Agreement, this Agreement may not be used in any court
or administrative proceeding.
10. LEGAL FEES. The Executive shall be reimbursed for all reasonable legal
fees incurred by the Executive in connection with his representation relating
hereto and the review and preparation hereof, in all cases, up to and including
the date of this Agreement.
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11. SCOPE OF AGREEMENT; ENFORCEABILITY. This Agreement constitutes the
entire understanding and agreement between the Corporation and the Executive
with regard to all matters herein and supersedes all prior oral and written
agreements and understandings of the parties with respect to such matters,
whether express or implied, including the Employment Agreement. This Agreement
shall inure to the benefit of, be binding upon and be enforceable by the
Executive's heirs, beneficiaries and/or legal representatives. This Agreement
shall inure to the benefit of, be binding upon and be enforceable by the
Corporation and its respective successors and assigns. If any term or
provision of this Agreement, or the application thereof to any person or
circumstances, will to any extent be invalid or unenforceable, the remainder of
this Agreement, or the application of such terms to persons or circumstances
other than those as to which it is invalid or unenforceable, will not be
affected thereby, and each term of this Agreement will be valid and enforceable
to the fullest extent permitted by law.
12. MATERIAL INDUCEMENTS.
(a) The provisions of Sections 4(a), 4(b), 6, 7 and 8 above are
material inducements to the Corporation entering into and performing this
Agreement. The Executive acknowledges and agrees that the Corporation will have
no adequate remedy at law, and would be irreparably harmed, if the Executive
breaches or threatens to breach any of the provisions of Sections 4(a), 4(b), 6,
7 and/or 8 of this Agreement. The Executive further agrees that the Corporation
shall be entitled to injunctive relief to prevent any breach or threatened
breach of Sections 4(a), 4(b), 6, 7 and/or 8 of this Agreement, and to specific
performance of each of the terms of such sections in addition to any other legal
or equitable remedies that the Corporation may have. The Executive also agrees
that he shall not, in any equity proceeding relating to the enforcement of the
terms of Sections 4(a), 4(b), 6, 7 and/or 8 of this Agreement, raise the defense
that the Corporation has an adequate remedy at law.
(b) The provisions of Sections 4(b) and 6 above are material
inducements to the Executive entering into and performing this Agreement. The
Corporation acknowledges and agrees that the Executive will have no adequate
remedy at law, and would be irreparably harmed, if the Corporation breaches or
threatens to breach any of the provisions of Sections 4(b) or 6 of this
Agreement. The Corporation further agrees that the Executive shall be entitled
to injunctive relief to prevent any breach or threatened breach of Sections 4(b)
or 6 of this Agreement, and to specific performance of each of the terms of such
sections in addition to any other legal or equitable remedies that the Executive
may have. The Corporation also agrees that it shall not, in any equity
proceeding relating to the enforcement of the terms of Sections 4(b) or 6 of
this Agreement, raise the defense that the Executive has an adequate remedy at
law.
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(c) The parties acknowledge and agree that the provisions of
Paragraph 13(b) of the Employment Agreement, entitled Material Inducements, are
of no further force and effect and are replaced by this Section 12.
13. AMENDMENTS/WAIVER. This Agreement may not be amended, waived, or
modified otherwise than by a written agreement executed by the parties to this
Agreement or their respective successors and legal representatives. No waiver by
any party to this Agreement of any breach of any term, provision or condition of
this Agreement by the other party shall be deemed a waiver of a similar or
dissimilar condition or provision at the same time, or any prior or subsequent
time.
14. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given when received by hand-delivery to the other
party, by facsimile transmission, by overnight courier, or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive: Mr. Steve Greathouse
7140 Darby Avenue
Las Vegas, Nevada 89117
with a copy to: Andrew S. Brignone, Esq.
Morris, Brignone & Pickering
300 S. Fourth Street, #1203
Las Vegas, Nevada 89101
If to the Corporation: Alliance Gaming Corporation
6601 South Bermuda Road
Las Vegas, Nevada 89119
Attn: General Counsel
with a copy to: Michael L. Hirschfeld, Esq.
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
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15. ARBITRATION. Any dispute or controversy arising under or in connection
with this Agreement (other than one seeking injunctive or other equitable relief
under Sections 4(a), 4(b), 6, 7 and/or 8 of this Agreement) shall be settled
exclusively by arbitration, conducted in Las Vegas, Nevada in accordance with
the rules of the American Arbitration Association. The prevailing party is also
entitled to an award of reasonable attorneys fees and costs. Judgment may be
entered thereon. As to disputes or controversies for which injunctive or other
equitable relief is sought under Sections 4(a), 4(b), 6, 7 or 8 of this
Agreement, the action shall be commenced and conducted exclusively in a court of
competent jurisdiction in Las Vegas, Nevada.
16. NEUTRAL CONSTRUCTION. Each party to this Agreement and their attorneys
have reviewed and participated in the drafting of this Agreement, and,
accordingly, the normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting parties will not be employed or used in
any interpretation of this Agreement.
17. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Nevada without reference to its choice
of law provisions and shall be binding upon the parties and their respective
heirs, executors, successors and assigns.
18. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Corporation and the Executive have caused this
Agreement to be executed as of the date first above written.
ALLIANCE GAMING CORPORATION
By:
--------------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
--------------------------------------------------
STEVE GREATHOUSE
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EXHIBIT 10.75
AGREEMENT
AGREEMENT dated June 17, 1997 by and between ALLIANCE GAMING
CORPORATION, a Nevada corporation (the "Company"), and MORRIS GOLDSTEIN, an
individual (the "Executive").
R E C I T A L S :
A. The Company considers it important and in its best interest and
the best interest of its stockholders to foster the retention and engagement of
key senior personnel, and the Company desires to retain the services of the
Executive as Chief Executive Officer, on the terms and subject to the conditions
provided in this Agreement.
B. The Executive desires to accept such engagement by the Company
and to render services to the Company, on the terms and subject to the
conditions provided in this Agreement.
A G R E E M E N T :
The parties hereto agree as follows:
1. Employment. The Company hereby agrees to retain the services of
the Executive, and the Executive agrees to be retained by the Company, to render
services to the Company for the period, at the rate of compensation and upon the
other terms and conditions set forth in this Agreement.
2. Term. The term of the Executive's employment under this Agreement
(the "Term") shall commence on June 18, 1997 (the "Commencement Date"; which
shall be the date on which the Executive commences full-time employment with the
Company) and shall continue through and including June 30, 2000, unless earlier
terminated specifically as provided in this Agreement (the date of any
termination of this Agreement or the expiration of the Term, as provided herein,
the "Termination Date"). From and after December 31, 1999, the parties shall
commence and, to the extent appropriate, thereafter continue, a dialogue, in
good faith, as to whether the Executive's employment with the Company shall be
continued after the Termination Date; it being understood, however, that neither
party shall have any obligation with respect to the continuation of such
employment.
3. Position and Duties. (a) Position. The Executive shall serve as
Chief Executive Officer of the Company. During his employment hereunder, the
Executive shall report directly to the Company's Board of Directors (the
"Board"). The Executive shall devote all or substantially all of his business
time to the fulfillment of his duties hereunder.
<PAGE> 2
(b) The Company shall, subject to the Board's fiduciary duty, cause
the Executive to be nominated for election to the Board at the next
regularly-scheduled annual stockholders meeting after the date hereof. The
Company shall include the Executive in the slate of directors recommended by
management at such meeting. The Executive shall, if so elected by the
stockholders of the Company serve on the Board from time to time, for successive
periods of such election(s), subject, in each case, to (x) the Board's fiduciary
duty (both with respect to the nomination of the Executive to the Board or
election by the Board to refrain from such nomination) and (y) the continued
election thereto by the Company's stockholders; it being understood that the
failure of the Board to nominate the Executive to the Board, as set forth in
clause (x) above, or the failure of the stockholders of the Company to elect the
Executive to the Board, as set forth in clause (y) above, shall not give rise to
any right on the part of the Executive to terminate this Agreement or give the
Executive any other rights hereunder.
(b) Duties. During the Term, the Executive shall, subject to
supervision by the Board, have the authority and power to perform such duties as
are consistent with those of Chief Executive Officer of the Company. During the
Term, the Executive shall perform the duties contemplated by such title and such
other duties, consistent with his experience and abilities, as may be properly
assigned to the Executive by the Board. The Executive shall use his best efforts
to further the interests of the Company. The Executive shall (x) re-locate on a
full-time basis to Las Vegas, Nevada no later than September 1, 1997 and (y)
render services to the Company from the Company's principal offices in Las
Vegas, Nevada; the parties further acknowledge and agree that the Executive may
be required to travel extensively during the Term in fulfilling his duties
hereunder (including numerous trips to New York City, internationally and to
other locations).
4. Compensation and Reimbursement of Expenses. (a) Compensation. For
purposes of this Agreement, each consecutive 12-month period during the Term
ending on each June 30th during the Term shall be referred to as an "Employment
Year"; it being understood, however, that the first Employment Year shall
include the period from the Commencement Date through June 30, 1997, during
which period the Executive shall receive a Base Salary (as defined below) at the
rate set forth in the following sentence. For services rendered by the Executive
under this Agreement, the Company shall pay to the Executive as compensation
during each Employment Year during the Term, a base amount of compensation (the
"Base Salary") at an annual rate of $450,000 per year (prorated for any partial
Employment Year, including the period from the Commencement Date through June
30, 1997). The Base Salary shall be payable in equal bi-weekly installments (or
otherwise as shall be customary for the Company from time to time), commencing
with the end of the pay period which next follows the Commencement Date, and
shall be subject to customary payroll deductions (i.e., for social security,
federal, state and local taxes and other amounts customarily withheld from the
compensation of members of the Board and/or employees of the Company).
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(b) Bonus. The Executive shall be eligible to receive from the
Company, within 120 days of the end of each Employment Year, a cash bonus in
respect of such Employment Year (the "Annual Bonus"), which shall be based upon
all relevant criteria, including without limitation, (i) the performance of the
Company and/or the operations of the Company during such Employment Year, based
upon customary financial and other criteria, such as, but not limited to, return
on the Company's consolidated stockholders' equity and total capital (i.e.,
stockholders' equity and total debt), performance of the Company's Common Stock,
par value $.10 per share (the "Common Stock"), and the Company's absolute and
relative amounts of consolidated cash flow, earnings and earnings per share,
operating income and net income, and the comparison of such results with the
Company's budgets and projections therefor and (ii) the performance of the
Executive in rendering services to the Company (such criteria in clauses (i) and
(ii), the "Targets"). The Targets for each Employment Year during the Term shall
be determined by the Board, after receiving meaningful and good faith input from
the Executive, not less than 15 days prior to the beginning of such Employment
Year; provided, that the Targets for the first Employment Year hereunder shall
be determined, as described above, on or prior to September 30, 1997. The
Targets shall be set at levels that are aggressive but achievable. It is
contemplated that 100% of the Annual Bonus for achievement of 100% of the
Targets shall be $250,000 (the "Target Bonus"); in the event that between 80%
and 120% of the Targets for any Employment Year during the Term are achieved (as
determined by the Board, in good faith, in its sole discretion), the amount of
the Annual Bonus for such Employment Year shall be a percentage of the Target
Bonus for such Employment Year that is the same as the percentage of achievement
of the Targets. In the event that more than 120% of the Targets for any
Employment Year is achieved (as determined by the Board, in good faith, in its
sole discretion), the amount of the Annual Bonus shall not exceed 120% of the
Target Bonus; it being understood that the Company shall not be obligated to pay
to the Executive any Annual Bonus in the event that less than 80% of the Targets
are achieved (as determined by the Board, in good faith, in its sole
discretion). The Annual Bonus shall be subject to customary payroll deductions
(i.e., for social security, federal, state and local taxes and other amounts
customarily withheld from the compensation of members of the Board and/or
employees of the Company).
(c) Options. As an additional inducement to the Executive to accept
employment with the Company, the Company shall grant to the Executive options to
acquire an aggregate of 500,000 shares of Common Stock (the "Employment
Options"), as follows:
(x) 250,000 of such Employment Options (the "Basic Employment
Options") shall become vested and exercisable in four equal tranches as follows,
subject to the provisions of Section 8 below:
(1) 62,500 Employment Options on the Commencement Date;
(2) 62,500 Employment Options on June 30, 1998;
(3) 62,500 Employment Options on June 30, 1999; and
(4) 62,500 Employment Options on June 30, 2000; and
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(y) an additional 250,000 of such Employment Options (the
"Additional Vesting Options") shall become vested and exercisable in four equal
tranches as follows, subject to the provisions of Section 8 below:
(1) 62,500 Employment Options on the Commencement Date;
(2) 62,500 Employment Options on June 30, 1998;
(3) 62,500 Employment Options on June 30, 1999; and
(4) 62,500 Employment Options on June 30, 2000;
provided, that in the case of this clause (y), an additional condition (the
"Additional Vesting Conditions") to the vesting and exercisability of any or all
of such Additional Vesting Options shall be that:
(I) as to one-third of the aggregate amount of such Additional
Vesting Options, allocated equally in four equal tranches of 20,834, 20,834,
20,833 and 20,833 each, as to each of the tranches of Additional Vesting Options
provided to become vested in clauses (1) through (4) above, the price of a share
of Common Stock on the Nasdaq Stock Market (or other principal exchange or
listing agency on which the Common Stock is then traded or listed) shall have
equaled or exceeded $11.00 for any 20 out of 30 consecutive trading days on or
prior to June 30, 2000;
(II) as to one-third of the aggregate amount of such Additional
Vesting Options, allocated equally in four equal tranches of 20,833, 20,833,
20,834 and 20,833 each, as to each of the tranches of Additional Vesting Options
provided to become vested in clauses (1) through (4) above, the price of a share
of Common Stock on the Nasdaq Stock Market (or other principal exchange or
listing agency on which the Common Stock is then traded or listed) shall have
equaled or exceeded $13.00 for any 20 out of 30 consecutive trading days on or
prior to June 30, 2000; and
(III) as to one-third of the aggregate amount of such Additional
Vesting Options, allocated equally in four equal tranches of 20,833, 20,833,
20,833 and 20,834 each, as to each of the tranches of Additional Vesting Options
provided to become vested in clauses (1) through (4) above, the price of a share
of Common Stock on the Nasdaq Stock Market (or other principal exchange or
listing agency on which the Common Stock is then traded or listed) shall have
equaled or exceeded $15.00 for any 20 out of 30 consecutive trading days on or
prior to June 30, 2000;
in each case, irrespective of whether or not the applicable Additional Vesting
Condition(s) shall have occurred prior or subsequent to the vesting dates
otherwise provided for above in this clause (y).
As to each tranche of Basic Employment Options set forth in clauses
(1) through (4) of Section 4(c)(x), 25,800 Basic Employment Options shall be
granted under the
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Company's 1996 Long-Term Incentive Plan (the "1996 Plan") and shall, to the
extent permitted by applicable law, be treated as incentive stock options under
Section 422 of the Internal Revenue Code of 1986, as amended (the "IRS Code").
The remainder of the Employment Options shall not be granted under any of the
Company's stock option plans, including the 1996 Plan, but such remainder of the
Employment Options shall be subject to the provisions of Sections 2, 3, 5, 7, 8,
9, 10, and 12 through 23 of the 1996 Plan. In addition, all of the Employment
Options shall (I) have a term of five years from the Commencement Date hereof,
subject to earlier termination as provided in the 1996 Plan, and (II) have an
exercise price of $3.875 per share, subject to adjustment as provided in the
1996 Plan. The Company shall use commercially reasonable efforts to cause to be
filed after the date which is one year after the Commencement Date a
registration statement on Form S-3 or S-8 (or such other form that the Company
shall deem appropriate) or take other appropriate steps to cause the shares of
Common Stock issuable upon exercise of all or any of the Employment Options
(other than the Basic Employment Options issued under the 1996 Plan, as
described above, which are otherwise covered under the Company's existing
registration statement(s) on Form S-8) to be freely-tradeable under the
Securities Act of 1933, as amended, upon issuance thereof. None of the
Employment Options except those described in the first sentence of this
paragraph, to the extent permitted by applicable law, shall be incentive stock
options under Section 422 of the IRS Code.
(d) Reimbursement of Expenses. Consistent with established policies
of the Company as in effect from time to time, the Company shall pay to or
reimburse the Executive for all reasonable and actual out-of-pocket expenses,
including without limitation, travel, hotel and similar expenses and the
reasonable and actual out-of-pocket expenses incurred by the Executive in
applying for and obtaining applicable gaming licenses, incurred by the Executive
from time to time in performing his obligations under this Agreement.
5. Benefits. (a) Benefit Plans. The payments provided in Section 4
above are in addition to any benefits to which the Executive may be, or may
become, entitled under any of the Company's benefit plans or programs for which
senior executive officers of the Company are or shall become eligible. In
addition, the Executive shall be eligible to receive during the Term benefits
and emoluments which are consistent with the benefits and emoluments provided to
all members of the Board or senior executive officers of the Company.
(b) Vacation. The Executive shall be entitled to three weeks annual
paid vacation time during each Employment Year. Any unused vacation time may be
accrued and carried forward to the succeeding Employment Year consistent with
the Company's policy for senior executive officers as in effect from time to
time. The Executive shall also be entitled to reasonable periods of sick leave
consistent with the Company's policy for senior executive officers as in effect
from time to time.
(c) Other Items. The Company shall pay for the initiation fees and
cost of membership during the Term in a country club located in Las Vegas,
Nevada to be mutually
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agreed to by the Company and the Executive for the Executive and his family;
provided, that if there is a recoupable or similar bond associated therewith,
upon termination of the Executive's membership, such bond (or the portion
thereof payable to the Executive) shall be returned to the Company. The Company
shall pay $90,000 to the Executive as full reimbursement for the Executive to
relocate his residence to Las Vegas, Nevada. In addition, the Company shall
reimburse the Executive for his reasonable and actual out-of-pocket costs and
expenses for interim or temporary housing in Las Vegas, Nevada between the
Commencement Date and the earlier of (x) the date that the Executive procures
permanent housing in Las Vegas, Nevada and (y) September 1, 1997.
(d) No Reduction. There shall be no material reduction or diminution
of the benefits provided in this Section 5 during the Term unless (i) the
Executive shall have provided his consent to such reduction or diminution, (ii)
an equitable arrangement (embodied in an ongoing substitute or alternative
benefit or plan) has been made with respect to such benefit or plan or (iii)
such reduction is part of a program of across-the-board benefit reductions
similarly affecting the senior executive officers of the Company.
6. Benefits Payable Upon Disability. (a) Disability Benefits. During
any period of Disability (as defined below) occurring during the Term, the
Company shall continue to pay to the Executive the Base Salary as provided
herein and continue to extend to him the benefits described in Sections 4 and 5
hereof; it being understood that if disability benefits are provided under any
disability insurance or similar policy maintained by the Company (or maintained
by the Executive, the cost of which is reimbursed or paid by the Company),
payments under such policy shall be deemed to be payments by the Company and
shall offset any Base Salary payable to the Executive under this Agreement. As
used in this Agreement, "Disability" shall mean the inability (as determined by
a majority of the remaining members of the Board (other than the Executive)
voting for such determination) of the Executive to render services to the
Company, as provided herein, as a result of physical or mental infirmity or
disability.
(b) Services During Disability. During the Term, notwithstanding any
Disability, the Executive shall, to the extent that he is physically and
mentally able to do so, furnish information, assistance and services to the
Company, and from time to time he shall make himself available to the Company to
undertake reasonable assignments and fulfill his duties hereunder, consistent
with his current position with the Company and his physical and mental health.
7. Termination. This Agreement shall expire or be terminated, as
applicable, in accordance with the provisions of this Section 7, in which case
the provisions of Section 8 below shall be applicable.
(a) Upon Expiration of the Term. This Agreement shall terminate in
accordance with Section 2 above.
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<PAGE> 7
(b) By the Company. In addition to the provisions of Section 7(a)
above, this Agreement is subject to earlier termination by the Company, as
follows:
(i) Death of Executive. If the Executive dies, this Agreement shall
terminate, the Termination Date being the date of the Executive's death.
(ii) Disability. If the Executive has been absent from service to
the Company, as required in this Agreement, for a period of 60 days or
more as a result of Disability during any consecutive 120-day period
during the Term, the Company shall have the right to terminate this
Agreement (as determined by a majority of the remaining members of the
Board (other than the Executive) voting for such determination), the
Termination Date being 15 days after written notice thereof is provided to
the Executive.
(iii) Termination by the Company for Cause. The Company shall have
the right to terminate the Executive's employment under this Agreement for
Cause (as defined below), the Termination Date to be immediately upon
written notice thereof from the Company to the Executive. For purposes of
this Agreement, "Cause" shall mean the Executive's (A) conviction of any
misdemeanor involving moral turpitude or any felony, (B) misappropriation
or embezzlement from the Company, (C) denial, revocation or rejection of
any applicable gaming license or permit, or commission of any act which
could reasonably be expected to result in such denial, revocation or
rejection, (D) any material breach of the provisions hereof, or (E) the
refusal by the Executive to undertake the Executive's duties or
obligations hereunder.
(iv) Termination by the Company Without Cause. The Company shall
have the right to terminate the Executive's employment hereunder for any
reason not specifically set forth in clauses (i), (ii) or (iii) of this
Section 7(b), the Termination Date being 15 days after written notice
thereof by the Company to the Executive.
(c) By The Executive. In addition to the provisions of Section 7(a)
above, this Agreement is subject to earlier termination by the Executive, as
follows:
(i) Termination by the Executive for Just Cause. The Executive shall
have the right to terminate his employment under this Agreement upon the
occurrence of a material breach of this Agreement by the Company, which
the parties agree shall be limited to (A) a reduction by the Company in
the Base Salary below the minimum Base Salary specified in Section 4(a)
above or the failure of the Company to pay to the Executive any portion of
the Base Salary within 30 days of the time that any such amount is due and
payable hereunder, (B) the assignment to the Executive of duties and
responsibilities that are materially inconsistent with those of a senior
executive officer of the Company, (C) a significant reduction in the
Executive's position, title, organization level, duties or
responsibilities within the Company or (D) the failure of the
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<PAGE> 8
Company to obtain the assumption of this Agreement by any successors as
required by Section 13(a) below, in each case, which has not been cured by
the Company after 30 days' written notice from the Executive to the
Company. In the event that the Executive elects to terminate this
Agreement under this Section 7(c)(i), the Executive shall exercise such
right by giving written notice thereof to the Company within 10 days after
the lapsing of the 30-day period referred to above in this clause (i)
(assuming that the Company shall have failed to cure such material breach
within such period); thereafter, such right to terminate shall no longer
be exercisable. The Termination Date shall be 15 days after the date of
the applicable written notice giving rise to a termination by the
Executive to the Company.
(ii) Termination by the Executive Without Just Cause. The Executive
shall have the right to terminate the Executive's employment under this
Agreement for any reason not specifically set forth in clause (i) of this
Section 7(c), the Termination Date being 15 days after written notice
thereof from the Executive to the Company.
8. Effect of Termination. The following provisions shall be
applicable in the event of the termination of this Agreement as provided in
Section 7 above.
(a) Expiration of Term. Upon termination of this Agreement as
provided in Section 7(a) above, this Agreement shall terminate and be of
no further force and effect, except as provided in Sections 10, 11, 12 and
13(b) below, which shall survive the Termination Date, to the extent
provided therein, and no additional payments, liabilities or obligations
shall be due and owing from either party to the other; provided, that the
provisions of Section 10(a) shall survive such termination for the
duration of the Restricted Period (as defined in Section 10 below) or for
such shorter period that the Company elects, to the extent, in each case,
that the Company so elects and provides written notice thereof to the
Executive (which notice shall be given within 15 days prior to the
Termination Date); and thereafter pays to the Executive the Base Salary
otherwise payable hereunder (payable in accordance with the Company's
regular pay schedule), during the Restricted Period or such shorter period
(with the Base Salary prorated for such shorter period), as applicable.
(b) Death or Disability. Upon the termination of this Agreement as
provided in Section 7(b)(i) or 7(b)(ii) above, the Company shall pay to
the Executive or the Executive's estate, as applicable, (i)(A) a lump-sum
amount equal to the Base Salary otherwise payable to the Executive
hereunder for the 12-month period following the Termination Date, payable
in accordance with the Company's pay schedule, and (B) any Annual Bonus
for the Employment Year in which the Termination Date occurs that the
Board determines in good faith would otherwise have been payable had the
Executive not died or become disabled, which Annual Bonus shall be reduced
by prorating it through the Termination Date, payable, in the case of this
clause (B), at the time such payment would otherwise be due and payable
hereunder, and (ii) expense reimburse-
8
<PAGE> 9
ment amounts accrued through the Termination Date, at the time such
payment would otherwise be due and payable thereunder, and neither party
shall have any further liability or obligation to the other, except that
the provisions of Sections 10, 11, 12 and 13(b) below shall survive the
Termination Date, to the extent provided therein. Notwithstanding the
provisions of clause (i) above, the Company shall have the right to
provide for either or both of the payments descried therein by purchasing
life insurance on the Executive's life itself or reimbursing to the
Executive the cost of the premiums in respect of such life insurance which
shall be purchased directly by the Executive; in the event that either or
both of such insurance coverage is obtained, such payments shall
constitute the Executive's estate's or heirs' sole remedy in respect of
such payments.
An amount equal to 50% of any unvested Employment Options as of the
Termination Date shall vest and become exercisable by virtue of any
termination under Section 7(b)(i) or 7(b)(ii) and, notwithstanding any of
the specific provisions of the 1996 Plan that may be applicable to the
Employment Options, as provided herein, the Executive's estate shall have
a period of two years from the Termination Date to exercise such options;
it being understood, however, that in the event of a termination under
Section 7(b)(i) or 7(b)(ii), in order for any of the Additional Vesting
Options to vest or become exercisable, the Additional Vesting Conditions
applicable thereto shall have been achieved prior to the earlier of (x)
the applicable periods originally provided in Section 3(c)(y) and (y) the
Termination Date provided in Section 7(b)(i) or 7(b)(ii), as applicable.
(c) Termination by the Company For Cause or the Executive Without
Just Cause. Upon termination of this Agreement as provided in Sections
7(b)(iii) or 7(c)(ii) above, the Company shall pay to the Executive (i)
the accrued and unpaid Base Salary, if any, through the Termination Date
and (ii) expense reimbursement amounts accrued through the Termination
Date, at the time such payments are otherwise due and payable thereunder,
and neither party shall have any further liability or obligation to the
other, except that the provisions of Sections 10, 11, 12 and 13(b) below
shall survive the Termination Date, to the extent provided therein. No
unvested Employment Options shall vest or become exercisable by virtue of
any termination under Section 7(b)(iii) or 7(c)(ii), and any and all
rights thereto then possessed by the Executive shall be terminated and of
no further force and effect; it being understood that in the event of a
termination under Section 7(b)(iii) or 7(c)(ii), in order for any of the
Additional Vesting Options to vest or become exercisable, the Additional
Vesting Conditions applicable thereto shall have been achieved prior to
the earlier of (x) the applicable periods originally provided in Section
3(c)(y) and (y) the Termination Date provided in Section 7(b)(iii) or
7(c)(ii), as applicable.
(d) Termination by the Company Without Cause or the Executive for
Just Cause. Upon termination of this Agreement as provided in Sections
7(b)(iv) or 7(c)(i)
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<PAGE> 10
above, the Company shall pay to the Executive (i) the Base Salary that
would otherwise be payable hereunder during the Restricted Period;
provided, that the Executive continues to comply with the covenants in
Sections 10 and 11 below, as provided therein, and (ii) expense
reimbursement amounts accrued through the Termination Date, in each case,
in the case of clause (i) and (ii) above, at the time such payments are
otherwise due and payable thereunder, and neither party shall have any
further liability or obligation to the other, except that the provisions
of Sections 10, 11, 12 and 13(b) below shall survive the Termination Date,
to the extent provided therein. All unvested Employment Options that are
otherwise provided to be vested during the 12- month period following the
applicable Termination Date, shall vest and become exercisable (in
accordance with the applicable provisions of the 1996 Plan) by virtue of
any termination under Section 7(b)(iv) or 7(c)(i); it being understood,
however, that in the event of a termination under Section 7(b)(vi) or
7(c)(i), in order for any of the Additional Vesting Options to vest or
become exercisable, the Additional Vesting Conditions applicable thereto
shall have been achieved prior to the earlier of (x) the applicable
periods originally provided in Section 3(c)(y) and (y) the Termination
Date provided in Section 7(b)(iv) or 7(c)(i), as applicable.
9. Federal Income Tax and Other Withholdings. The Company shall
withhold from any amount or benefits payable pursuant to this Agreement such
federal, state, city or other taxes and other amounts as may be required to be
withheld pursuant to any applicable law or governmental regulations or ruling
and shall timely pay over to the appropriate governmental or other authorities
the amount withheld, together with any additional amounts required to be paid by
the Company in respect thereof.
10. Non-Competition; Non-Solicitation and Standstill. (a) The
Executive covenants and agrees that he will not at any time during the Term and
for a period of 12 months following any Termination Date (the 12-month period
following any Termination Date hereunder, the "Restricted Period"), directly or
indirectly, whether as employee, owner, partner, agent, director, officer,
consultant, equityholder (except as the beneficial owner of not more than 5% of
the outstanding shares of a corporation, any of the capital stock of which is
listed on any national or regional securities exchange or quoted in the daily
listing of over-the-counter market securities and, in each case, in which the
Executive does not undertake any management or operational or advisory role) or
in any other capacity, for his own account or for the benefit of any person or
entity, (1) establish, engage in or be connected with, in any manner, any person
or entity which is at the time engaged in a business which is on the
Commencement Date or on any applicable Termination Date in competition (other
than competition in any immaterial respect or competition that is in a business
that is immaterial or insignificant to the Company) with (a) the Company or any
of its subsidiaries or affiliates, (b) any product, service or other business of
any of the Company or such subsidiaries or affiliates that is in production,
distribution or development as of the Termination Date, including without
limitation, rendering advice or other services to any casino and/or any in-room,
in-flight, Internet or network games or gaming (whether or not involving
gambling) or casino or
10
<PAGE> 11
hotel management data collection systems or (2) otherwise compete in any way
with the Company or its subsidiaries or affiliates (other than competition in
any immaterial respect or competition that is in a business that is immaterial
or insignificant to the Company).
(b) The Executive shall not, directly or indirectly, at any time
during the Term or Restricted Period (1) take any action to solicit or divert
any joint venture partners, business partners, business (or potential business)
or clients or customers away from the Company or any of its subsidiaries or
affiliates, (2) induce customers, clients, joint venture partners, business
partners, suppliers, agents or other persons under contract or otherwise
associated or doing business with the Company or any of its subsidiaries or
affiliates to terminate, reduce or alter any such association or business with
or from the Company or such subsidiaries or affiliates and/or (3) induce any
person in the employment of the Company or any of its subsidiaries or affiliates
or any consultant to the Company or such subsidiaries or affiliates to (A)
terminate such employment or consulting arrangements, (B) accept employment or
enter into consulting arrangements with any person or entity other than the
Company and/or (C) interfere with the customers, suppliers or clients of the
Company or any of its subsidiaries or affiliates in any manner or the business
of the Company or any of its subsidiaries or affiliates in any manner. For
purposes of this Section 10(b), "potential business" means any current or
reasonably foreseeable commercial activity or any current or reasonably
foreseeable commercial opportunities associated in any way with the Company's
activities (other than ancillary or immaterial activities).
(c) The Executive shall not, at any time during the Term or
Restricted Period, except as specifically requested in writing by the Company,
singly or with any other person, directly or indirectly, propose, enter into or
agree to enter into, or encourage any other person to propose, enter into or
agree to enter into (a) any form of business combination, acquisition or other
transaction relating to the Company or (b) any form of restructuring,
recapitalization or similar transaction with respect to the Company. In
addition, during the Restricted Period, except as specifically requested by the
Company in writing, the Executive shall not, singly or with any other person,
directly or indirectly, (1) acquire, or offer, propose or agree to acquire, by
tender offer, purchase or otherwise, any voting securities of the Company except
through the exercise of Employment Options, (2) make, or in any way participate
in, any solicitation of proxies or written consents with respect to voting
securities of the Company (it being understood that the mere execution of a
proxy or written consent for his own securities beneficially owned shall not be
treated as constituting participation in such a solicitation), (3) become a
participant in any election contest with respect to the Company or a nominee to
the Board or a member of the Board, (4) seek to influence any person with
respect to the voting or disposition of any voting securities of the Company,
(5) demand a copy of the Company's list of stockholders or its other books and
records, (6) participate in or encourage the formation of any partnership,
syndicate or other group that owns or seeks or offer to acquire beneficial
ownership of any voting securities of the Company or that seeks to affect
control of the Company or for the purpose of circumventing any provision of this
Agreement, (7) propose or support any director or slate of directors for
nomination, appointment or election to the Board
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<PAGE> 12
(it being understood that the mere execution of a proxy or written shareholder
consent for his own securities beneficially owned shall not be treated as
constituting such support), (8) otherwise act to seek or to offer to control or
influence, in any manner, the Board or policies of the Company or (9) seek to
amend or change this Section 10(c).
11. Confidential Information and Non-Disparagement. (a) The
Executive shall hold in a fiduciary capacity for the benefit of the Company and
its stockholders all secret, confidential or proprietary information, knowledge
or data relating to the Company (and any of its subsidiaries or affiliates),
which shall have been obtained by the Executive during or by reason of his
employment by the Company, in accordance with the principles of NRS 600A.010 et
seq. (the so-called Uniform Trade Secrets Act). During and after the end of the
Term, the Executive shall not, without the prior written consent of the Company,
communicate or divulge any such information, knowledge or data to any person or
entity other than the Company (or such applicable subsidiaries or affiliates)
and those designated by them which would result in any misappropriation under
and as defined in such Act, except that, during his employment hereunder, in
furtherance of the business and for the benefit of the Company, the Executive
shall be permitted to provide confidential information as appropriate to
attorneys, accountants, financial institutions or other persons or entities
engaged in business with the Company from time to time.
(b) Each of the Executive and the Company agrees that during the
Term and for a period of three years following any applicable Termination Date,
neither shall, publicly or privately, disparage or make any statements (written
or oral) that could impugn the integrity, acumen (business or otherwise), ethics
or business practices, of the other, except, in each case, to the extent (but
solely to the extent) (I) necessary in any judicial or arbitral action to
enforce the provisions of this Agreement or (II) in connection with any
judicial, regulatory or administrative proceeding to the extent required by
applicable laws. For purposes of this Section 11(b), references to the Company
includes its officers, directors, employees, consultants and shareholders (which
are reasonably known as such to the Executive) on the date hereof and hereafter.
12. Indemnification and Liability Insurance.
(a) Indemnification. The Company shall indemnify and hold the
Executive harmless, to the fullest extent legally permitted by Section 78.751 of
the Nevada Corporation Code (as amended and in effect from time to time) against
any and all expenses, liabilities and losses (including without limitation,
reasonable attorneys' fees and disbursements of counsel reasonably satisfactory
to the Company), incurred or suffered by him in connection with his service as
an officer and as a member of the Board during the Term, in each case, except to
the extent of the Executive's negligence or willful misconduct.
(b) Insurance. The Company shall maintain, for the benefit of the
Executive, a directors' and officers' liability insurance policy insuring the
Executive's services as a
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<PAGE> 13
member of the Board during the Term in accordance with its customary practices
as in effect from time to time during the Term. The parties acknowledge and
agree that such policy may cover other directors and officers of the Company in
addition to the Executive.
13. General Provision.
(a) Assignment. Neither this Agreement nor any right or interest
hereunder shall be assignable by the Executive or the Company without the prior
written consent of the other; provided, that (i) in the event of the Executive's
death during the Term, the Executive's estate and his heirs, executors,
administrators, legatees and distributees shall have the rights and obligations
set forth herein, as provided herein, and (ii) nothing contained in this
Agreement shall limit or restrict the Compan s ability to merge or consolidate
or effect any similar transaction with any other entity, irrespective of whether
the Company is the surviving entity; provided, that such surviving entity shall
continue to be bound by the provisions hereof binding upon the Company.
(b) Material Inducements. The provisions of Sections 10 and 11 above
are material inducements to the Company entering into and performing this
Agreement; accordingly, in the event of any breach of such provisions by the
Executive, in addition to all other remedies at law or in equity possessed by
the Company, (x) the Company shall have the right to terminate and not pay any
amounts payable to the Executive hereunder and the Executive shall be required
to account for and return to the Company any and all profits derived from the
ownership or exercise of the Employment Options and any unvested Employment
Options shall be immediately forfeited and returned to the Company and (y) the
Company shall be permitted to obtain injunctive and other equitable relief (in
respect of any such breach or threatened breach), without the requirement of
posting a bond or other security.
(c) Binding Agreement. This Agreement shall be binding upon, and
inure to the benefit of, the Executive and the Company and their respective
heirs, executors, administrators, legatees and distributees, successors and
permitted assigns.
(d) Amendment of Agreement. This Agreement may not be modified or
amended except by an instrument in writing signed by the parties hereto.
(e) Severability. If, for any reason, any provision of this
Agreement is determined to be invalid or unenforceable, such invalidity or lack
of enforceability shall not affect any other provision of this Agreement not so
determined to be invalid or unenforceable, but each such other provision shall,
to the full extent consistent with applicable law, continue in full force and
effect, irrespective of such invalid or unenforceable provision.
(f) Effect of Prior Agreements. This Agreement contains the entire
understanding between the parties hereto respecting the Executive's employment
by the
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<PAGE> 14
Company, and supersedes any prior agreement between the Company and the
Executive relating to the retention of the Executive as an employee of the
Company.
(g) Notices. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given (i) when delivered, if sent by telecopy
or by hand, (ii) one business day after sending, if sent by reputable overnight
courier service, such as Federal Express, or (iii) three business days after
being mailed, if sent by United States certified or registered mail, return
receipt requested, postage prepaid. Notices shall be sent by one of the methods
described above; provided, that any notice sent by telecopy shall also be sent
by any other method permitted above. Notices shall be sent, if to the Executive,
to care of Stephen G. Driggers, Esq., Wilson, Sonsini, Goodrich & Rosati, 650
Page Mill Road, Palo Alto, California 94304-1050; and if to the Company, to
Alliance Gaming Corporation, 6601 South Bermuda Road, Las Vegas, Nevada 89119,
directed to the attention of the Board with copies to the Chairman and the
Secretary of the Company; or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.
(h) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
(i) Arbitration. In the event of a dispute or controversy arising
under or in connection with this Agreement (except, at the option of the
Company, Sections 10 and 11 above, and as provided in Section 13(b) above), the
Executive shall give the Company or the Company shall give the Executive, as
applicable, a written demand for relief. If the dispute or controversy is not
resolved, it shall be settled exclusively by arbitration, conducted in Las
Vegas, Nevada, in accordance with the rules of the American Arbitration
Association (or if such association does not then conduct business in such city,
another arbitral panel reasonably satisfactory to each party) then in effect.
Judgment shall be entered on the arbitrator's award in any court having
jurisdiction over the parties hereto.
(j) Indulgences, Etc. Neither the failure nor any delay on the part
of either party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence.
(k) Headings. The headings of sections and paragraphs herein are
included solely for convenience of reference and shall not control the meaning
or interpretation of any of the provisions of this Agreement.
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<PAGE> 15
(l) Governing Law. This Agreement has been executed and delivered in
the State of Nevada, and its validity, interpretation, performance, and
enforcement shall be governed by the laws of such State, without regard to
principles of conflicts of laws.
(m) Employment Options. This Agreement shall be the only agreement
necessary to grant to the Executive the Employment Options. The parties agree
that the specific provisions of the 1996 Plan set forth in Section 4(c) above
shall be incorporated herein, mutatis mutandis, as if fully set forth herein,
and shall be binding upon the Executive and the Company.
(n) Regulatory Approval. The obligations of the Company herein are
subject to applicable regulatory approvals, including without limitation, the
approval of applicable gaming-related regulators. The Executive represents that
he is not aware of any reason that such approval shall not be obtained in the
ordinary course of business.
15
<PAGE> 16
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Executive has signed this
Agreement, all as of the date first set forth above.
Alliance Gaming Corporation
By: [SIG]
----------------------------------
Name: Scott D. Schweinfurth
Title: Treasurer, CFO, SR. VP
------------------------------------
Morris Goldstein
16
<PAGE> 1
EXHIBIT 10.76
EMPLOYMENT AGREEMENT
AGREEMENT dated as of July 1, 1997 (the "Agreement") by and between
ALLIANCE GAMING CORPORATION, a Nevada corporation (the "Company"), and JOEL
KIRSCHBAUM, an individual (the "Employee").
R E C I T A L S:
A. The Company considers it important and in its best interest and
the best interest of its stockholders to secure the long-term engagement of key
senior personnel who have substantial experience and knowledge in both the
financial markets and the gaming industry, and the Company desires to retain the
services of the Employee, on the terms and subject to the conditions provided in
this Agreement.
B. The Employee desires to accept such engagement by the Company and
to render services to the Company, on the terms and subject to the conditions
provided in this Agreement.
A G R E E M E N T:
1. EMPLOYMENT. The Company hereby agrees to retain the services of
the Employee, and the Employee agrees to be retained by the Company as an
employee to render services to the Company upon the terms and conditions set
forth in this Agreement.
2. TERM. The term of the Employee's employment under this Agreement
shall be five (5) years commencing as of July 1, 1997 (the "Term"), unless
earlier terminated as provided in this Agreement; provided, however, that the
Term shall automatically be extended on June 30, 2002 and each subsequent June
30 for an additional one (1) year period unless, not later than six (6) months
prior to any such date, either party to this Agreement shall have given written
notice to the other party that he or it does not wish to extend, or further
extend, the Term.
3. DUTIES AND LOCATION.
(a) DUTIES. The Employee will be available, at the reasonable
request of the Board of Directors of the Company (the "Board") and/or the chief
executive officer of the Company, to work on major strategic transactions
involving the Company and/or one or more of its affiliates, including, without
limitation, mergers, acquisitions, divestitures, joint
<PAGE> 2
- 2 -
ventures, the negotiation of strategic alliances or relationships and financing
and refinancing transactions of all types. The Employee will report directly and
only to the Board and/or the chief executive officer of the Company, as
appropriate. The Employee's role in such matters, and in all activities to be
undertaken by the Employee under this Agreement, is to be consistent with that
of a senior financial advisor retained directly by the Board and/or the chief
executive officer of the Company, and the Employee is not expected to be
involved in matters relating to the day-to-day operation of the Company or any
of its affiliates.
The Employee will devote to the Company a portion of his business
time sufficient for him reasonably to fulfill his duties hereunder. However, the
Company explicitly acknowledges and agrees that the Employee is expected to
devote only a portion of his business time to the Company and/or its affiliates,
and that the Employee will pursue during the Term substantial business interests
other than the Employee's obligations under this Agreement.
(b) LOCATION. It is contemplated that the Employee will provide
services to the Company under this Agreement from an office in the New York
area. However, the Employee acknowledges and agrees that he may be required to
travel frequently from time to time during the Term in order to perform his
duties hereunder (including, without limitation, trips to Las Vegas, Nevada).
4. COMPENSATION.
(a) BASE SALARY. For purposes of this Agreement, each consecutive
12- month period ending on each June 30 during the Term shall be referred to as
an "Employment Year". For services rendered by the Employee under this Agreement
(and for the Employee agreeing to be available to provide such services), the
Company shall pay the Employee as compensation during each Employment Year
during the Term a Base Salary of $150,000 per year (prorated for any partial
Employment Years); provided, however, that such Base Salary shall be increased
as of July 1 of each year during the Term at a rate equal to the percentage
increase in the consumer price index for the New York - Northern New Jersey -
Long Island, NY-NJ-CT metropolitan area as reported by the U.S. Department of
Labor for the immediately preceding 12-month period, and such increased amount
shall thereupon become the "Base Salary" for all purposes under this Agreement.
The Base Salary shall be payable in equal bi-weekly installments, commencing
with the end of the regular pay period of the Company that next follows the
commencement of the Term.
(b) BONUSES. The Employee is entitled to, and the Company hereby
agrees to pay to the Employee, performance bonuses (the "Bonuses") during the
Term pursuant to the arrangements described in this Section 4(b). Prior to the
commencement of each Employment Year during the Term, the Board and the Employee
shall agree upon
<PAGE> 3
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appropriate performance goals for the Company for such Employment Year (which
goals will generally relate, without limitation, to mergers, acquisitions,
divestitures, joint ventures, strategic alliances, financings, refinancings
and/or similar transactions) involving the Company (and/or one or more of its
affiliates) and the target amount (and/or appropriate minimum amount) of Bonuses
to be paid to the Employee if the various performance goals are met. More than
one Bonus may be paid during or with respect to each Employment Year, and each
Bonus payable to the Employee hereunder shall, unless an alternative arrangement
has been established pursuant to Section 4(d) below, be paid to the Employee by
the Company in cash as soon as practicable after the performance goal to which
such Bonus relates has been met, but no later than ten (10) business days after
such performance goal has been met. Performance goals that relate to a
transaction shall be deemed to have been met upon the closing of such
transaction.
For the Employment Year beginning July 1, 1997, the performance
goals are: (i) the closing by the Company and/or one or more of its affiliates
during the Employment Year of the Refinancing as set forth in the Offer to
Purchase and Consent Solicitation Statement dated July 3, 1997 or a
substantially similar transaction, as determined by the Board in its reasonable
and good faith judgment; (ii) the closing by the Company and/or one or more of
its affiliates during the Employment Year of at least one "significant merger"
(a "significant merger" is defined as a merger, acquisition, divestiture, joint
venture, strategic alliance or similar transaction (or a series of related
transactions) with a value equal to or greater than $60 million); and/or (iii)
the closing by the Company and/or one or more of its affiliates during the
Employment Year of at least one "significant financing" (a "significant
financing" is defined as a financing, refinancing or similar transaction (or a
series of related transactions) with a value equal to or greater than $50
million); provided, however, that if for the Employment Year beginning July 1,
1997 and/or any subsequent Employment Year a significant financing is directly
related to a significant merger and closes within ten (10) business days before
or after the closing of such significant merger, and each such transaction would
cause a performance goal to be met during or with respect to such Employment
Year, only one of such performance goals - the one that results in the highest
Bonus amount - shall be deemed to have been met with respect to such related
transactions during or with respect to that Employment Year for purposes of this
Section 4(b). For this purpose, the "value" of a transaction shall be (x) with
respect to a merger, acquisition, joint venture, strategic alliance or similar
transaction, the aggregate value of the consideration paid, exchanged,
committed, invested or received by the Company (and/or any of its subsidiaries
or other entities controlled by the Company) with respect to the transaction
plus the aggregate principal amount of all debt incurred or assumed by the
Company (and/or any of its subsidiaries or other entities controlled by the
Company) in connection with the transaction, and (y) with respect to a
divestiture, financing, refinancing or similar transaction, the gross proceeds
(prior to reduction for any fees and expenses) paid to, made available to,
received by or to be invested in the Company (and/or any of its subsidiaries or
<PAGE> 4
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other entities controlled by the Company), whether or not disbursed, plus the
aggregate principal amount of any debt for which the Company (and/or any of its
subsidiaries or other entities controlled by the Company) is no longer liable.
Upon the achievement of the performance goal set forth in clause (i)
of the preceding paragraph, the Company shall pay the Employee a Bonus of
$950,000. Upon the achievement of the performance goal set forth in clause (ii)
of the preceding paragraph, the Company shall pay the Employee a minimum Bonus
of $200,000 for each significant merger. Upon the achievement of the performance
goal set forth in clause (iii) of the preceding paragraph, the Company shall pay
the Employee a minimum Bonus of $125,000 for each significant financing. The
Company shall pay each such Bonus in cash as soon as practicable after the
closing of the transaction that causes the related performance goal to be met,
but no later than ten (10) business days after such performance goal has been
met. If a performance goal is only partially achieved within an Employment Year,
the Board shall determine, in its reasonable and good faith judgment, what
amount of reduced Bonus, if any, shall be paid to the Employee with respect to
such performance goal during or with respect to such Employment Year.
The Board and the Employee agree that similar annual performance
goals and appropriate minimum and/or target Bonuses will be agreed to with
respect to each subsequent Employment Year during the Term. If, after reasonable
and good faith negotiation, the Board and the Employee cannot agree upon
reasonable annual performance goals and minimum and/or target Bonuses with
respect to such goals for any subsequent Employment Year, the Company and the
Employee agree that the performance goals set forth in clauses (ii) and (iii) of
the second preceding paragraph and the corresponding minimum Bonuses applicable
thereto in the immediately preceding paragraph shall be the performance goals
and minimum Bonuses for such subsequent Employment Year.
The Employee, upon 30 days notice to the Company, may elect to amend
or restructure his relationship with the Company to that of a financial
consultant or independent advisor, with compensation and other arrangements
reflecting the nature of such relationship and the services to be provided
(including, without limitation, choice of law provisions and provisions relating
to other permitted activities) in amounts reasonably consistent with the
compensation and Bonuses (including Special Bonuses pursuant to Section 4(c))
contemplated herein, in the reasonable and good faith judgment of the Board, but
calculated and payable in a manner customary for financial consultant or
independent advisor arrangements. Upon receipt of such notice, the Company and
the Employee will negotiate reasonably and in good faith to establish before the
end of the 30-day notice period a restructured agreement with respect to the
services contemplated to be provided hereunder.
<PAGE> 5
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The Company expressly acknowledges and agrees that the Employee will
be entitled to the Bonuses described above with respect to the attainment by the
Company and/or one or more of its affiliates of the established performance
goals, and each such Bonus will be paid by the Company to the Employee
regardless of whether the Employee is involved with the transaction or
transactions that resulted in the attainment of the performance goal, so long as
the Employee otherwise fulfills, in all material respects, his obligations to
the Company under Section 3(a). Further, if the Company and/or one or more of
its affiliates has taken material steps, as determined by the Board, in its
reasonable and good faith judgment, prior to the end of the Term towards a
significant merger and/or a significant financing and a performance goal to
which any such significant merger and/or significant financing relates is met
within nine (9) months after the end of the Term (or within twenty-one (21)
months of the end of the Term in the case of a transaction that does not close
within such nine (9) month period primarily because required regulatory
approval(s) has not been obtained), the Company shall pay to the Employee as
provided above the Bonuses that would have been payable to the Employee pursuant
to this Section 4(b) upon the closing of such transaction(s).
(c) SPECIAL BONUSES. In addition to the Base Salary and Bonuses
described above, the Board, in its sole discretion, may from time to time
determine to pay the Employee additional direct compensation in the nature of a
special bonus award (a "Special Bonus"), if it determines that the Employee has
provided services of special or exceptional value to the Company. The Employee
shall also be eligible to receive from time to time, in the sole discretion of
the Board or a committee of the Board, stock options and/or other awards with
respect to the stock of the Company.
(d) DEFERRAL OPPORTUNITIES. The Company agrees, subject to any
approvals required by applicable laws and/or regulations, that the Employee may
irrevocably elect, at any time prior to January 1, 1999, to forgo all or any
portion of any Bonuses to which the Employee may thereafter become entitled and
in lieu thereof to amend certain warrants beneficially owned by the Employee
and/or one or more of his affiliates that otherwise would expire on September
21, 1999 to extend their expiration date (and all applicable conditions with
respect to the exercise thereof) to June 18, 2002, and the Company will take all
necessary action to maintain the exempt status of any such extended warrants
under Section 16 of the Securities Exchange Act of 1934. The rate at which such
extension shall occur shall be such number of warrants (not more than three (3))
for each dollar of Bonuses foregone as the Board, in its reasonable and good
faith judgment, shall determine within ninety (90) days of the date of this
Agreement and after considering, among other things, the recommendation of an
investment banking, accounting or valuation firm with a national reputation.
(The Board shall retain such firm as soon as practicable after the date of this
Agreement, and the costs of obtaining such recommendation shall be borne by the
Company.)
<PAGE> 6
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At the election of the Employee (and/or one or more of his
affiliates that may then own any of such warrants), all or a portion of this
option to extend the expiration date of such warrants (and all applicable
conditions with respect to the exercise thereof) may also be effected by a
direct cash payment by the Employee (and/or any such affiliate) to the Company
on or prior to September 21, 1999 at the rate set forth in the prior paragraph,
rather than by the application of future Bonuses as set forth in this Section
4(d).
(e) BENEFITS. The Company will give the Employee the right to
participate in all of the benefit plans and programs maintained by the Company
for its senior executive officers and/or their dependents to the fullest extent
possible as if the Employee were employed by the Company on a full-time basis.
To the extent the Employee is not able to participate in any such benefit plan
or program, the Company will provide alternative arrangements to the Employee
(and/or his dependents, if applicable) so that, on an after-tax basis, the
Employee shall be in the same position as if the Employee had been a direct and
full participant in such plan or program; provided, however, that the maximum
amount required to be paid to the Employee pursuant to this sentence for or with
respect to an Employment Year shall not exceed $20,000, on an after-tax basis.
There shall be no material reduction or diminution of the benefits
provided in this Section 4(e) during the Term, unless (i) the Employee consents
to such reduction or diminution, (ii) an equitable arrangement (embodied in an
ongoing substitute or alternative benefit plan or program) has been made with
respect to the affected benefit plan or program or (iii) such reduction is part
of a program of across-the-board benefit reductions similarly affecting the
senior executive officers of the Company.
(f) ABSENCE AND SICK LEAVE. The Employee shall be entitled to such
reasonable periods of unavailability to provide services under this Agreement
because of vacation or illness comparable to those he would otherwise be
entitled to if he were a senior executive officer of the Company.
(g) FEDERAL INCOME TAX AND OTHER WITHHOLDINGS. The Company shall
withhold from any amount or benefits payable pursuant to this Agreement such
federal, state, city or other taxes and other amounts as may be required to be
withheld pursuant to any applicable law or governmental regulations or ruling
and shall timely pay over to the appropriate governmental authorities the
amounts withheld, together with any additional amounts required to be paid by
the Company (and/or any of its affiliates) in respect thereof.
5. REIMBURSEMENT OF EXPENSES. Consistent with established policies
of the Company as in effect from time to time for its senior executive officers,
the Company shall pay to or reimburse the Employee for all reasonable and actual
out-of-pocket expenses, including without limitation, travel, hotel and similar
expenses, incurred by the Employee
<PAGE> 7
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from time to time in performing his obligations under this Agreement; provided,
however, that any single expense item in excess of $5,000 must be approved by
the chief executive officer or the chief financial officer of the Company, which
approval shall not be unreasonably withheld or delayed.
6. PAYMENTS UPON DISABILITY OR DEATH.
(a) DISABILITY. During any period of Disability (as defined below)
occurring during the Term, the Company will continue to pay to the Employee the
full amount of the Base Salary, Bonuses and other compensation provided herein
and will continue to extend to the Employee the benefits described in Section 4
through the remainder of the Term, including, without limitation, Bonuses that
may yet become payable pursuant to the last sentence of Section 4(b); provided,
however, that if disability benefits are provided under any disability insurance
or similar policy maintained by the Company (or maintained by the Employee, with
the cost thereof being reimbursed or paid by the Company), payments under such
policy shall be considered as payments by the Company and shall offset any Base
Salary payable to the Employee under this Agreement. As used in this Agreement,
"Disability" shall mean the Employee's inability (as determined by a majority of
the members of the Board other than the Employee in their reasonable and good
faith judgment) to render services to the Company as contemplated by this
Agreement as a result of physical or mental infirmity on the basis of a written
medical opinion of an independent medical physician mutually acceptable to the
Company and the Employee. (If the Company and the Employee cannot agree on an
independent medical physician, each shall appoint one medical physician and
those two physicians shall appoint a third physician who shall render such
opinion. Each of the Company and the Employee shall appoint such medical
physician within five (5) business days of receiving written notice from the
other party requesting such appointment, and if such requested appointment is
not made within such five (5) business day period, the party failing to appoint
a medical physician shall be deemed to have accepted the medical physician
appointed by the other party.) In no event shall the Employee be considered
Disabled for purposes of this Agreement unless he is determined to be disabled
under the Company's regular long-term disability plan.
If the Employee is determined by the Board to be Disabled and such
Disability then continues for a period of an aggregate of five (5) months during
any eight (8) consecutive month period after such determination, the Board shall
have the right to terminate the Employee's employment under this Agreement upon
fifteen (15) days notice to the Employee if it determines, in its reasonable and
good faith judgment on the basis of a second written medical opinion of an
independent medical physician (selected as described above), that the Employee
will not be able to resume providing the services contemplated by this Agreement
within a reasonable period of time after the date of such proposed termination.
<PAGE> 8
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Upon the termination of the Employee's employment on account of
Disability pursuant to the preceding paragraph, the Employee's employment shall
terminate as of the effective date of the Board's final determination; provided,
however, that the Employee's employment shall be deemed to have terminated as of
the end of the fifteenth (15) month following the month in which such
termination decision by the Board is effective for purposes of all payments,
Base Salary, Bonuses, compensation, benefits, elections and other rights and
entitlements of the Employee under this Agreement, which shall continue to be
paid, provided or made available to the Employee during the fifteen (15) month
period as they would otherwise become due and/or payable as if the Employee's
employment under this Agreement had not terminated. After the completion of this
fifteen (15) month period, the Company will pay or provide to the Employee, to
the extent not otherwise paid or provided to the Employee in the normal course
during the fifteen (15) month period, (i) any accrued but unpaid Base Salary,
Bonuses and other compensation and benefits under this Agreement through the
date of deemed termination, including, without limitation, Bonuses that may yet
become payable pursuant to the last sentence of Section 4(b), (ii) expense
reimbursement amounts accrued through the date of deemed termination, and (iii)
any amounts owed to the Employee under any deferral arrangements established
under Section 4(d) and/or any other plans or arrangements between the Employee
and the Company and/or any of its affiliates (including, without limitation,
providing to the Employee (or his representative) any warrant extension election
made or able to be made by the Employee as provided in Section 4(d)), in each
case, at the time such payments, benefits and elections are otherwise due and/or
payable, and neither the Employee nor the Company shall have any further
liability or obligation to the other, except that the provisions of Sections 7,
8, 9, 10 and 12 shall continue in effect after the date of termination to the
extent provided in such Sections.
Notwithstanding any such Disability, during the remainder of the
Term, the Employee shall, to the extent that the Employee is physically and
mentally reasonably able to do so, furnish information, assistance and services
to the Company, and, upon the reasonable request in writing on behalf of the
Board (as determined by a majority of the members of the Board other than the
Employee) from time to time, the Employee shall make himself reasonably
available to perform a portion of the Employee's duties hereunder that is
reasonably consistent with the Employee's physical and mental health.
(b) DEATH. In the event of the Employee's death during the Term, the
Employee's employment shall terminate as of the date of death; provided,
however, that for purposes of all payments, Base Salary, Bonuses, compensation,
benefits, elections and other rights and entitlements of the Employee under this
Agreement, the Employee's employment shall be deemed to have terminated as of
the end of the fifteenth (15) month following the month in which the Employee's
death occurs, and, after the completion of this fifteen (15) month period, the
Company will pay or provide to the beneficiary(ies) designated by the
<PAGE> 9
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Employee from time to time in a written notice to the Company (or, in the
absence of an effective designation of beneficiary(ies) on the date of the
Employee's death, to the Employee's estate), to the extent not otherwise paid or
provided in the normal course during the fifteen (15) month period, (i) any
accrued but unpaid Base Salary, Bonuses and other compensation and benefits
under this Agreement through the date of deemed termination, including, without
limitation, Bonuses that may yet become payable pursuant to the last sentence of
Section 4(b), (ii) expense reimbursement amounts accrued through the date of
deemed termination, and (iii) any amounts owed to the Employee under any
deferral arrangements established under Section 4(d) and/or any other plans or
arrangements between the Employee and the Company and/or any of its affiliates
(including, without limitation, providing to such beneficiaries any warrant
extension election made or able to be made by the Employee as provided in
Section 4(d)), in each case, at the time such payments, benefits and elections
are otherwise due and/or payable, and neither the Employee nor the Company shall
have any further liability or obligation to the other, except that the
provisions of Sections 7 and 12 shall continue in effect after the date of
termination to the extent provided in such Sections for the benefit of the
Employee's designated beneficiary(ies) and the Employee's estate. All payments,
Base Salary, Bonuses, compensation, benefits, elections and other rights and
entitlements that the Company is or may become obligated to pay or provide to or
with respect to the Employee during the fifteen (15) month period described in
the first sentence of this Section 6(b) shall be paid to or provided to the
Employee's designated beneficiary(ies) or estate, as appropriate.
7. INDEMNIFICATION AND LIABILITY INSURANCE.
(a) INDEMNIFICATION. During the Term and thereafter, the Company
shall indemnify and hold the Employee harmless, to the fullest extent legally
permitted by Section 78.751 of the Nevada Revised Statutes (as amended and in
effect from time to time and including judicial interpretations thereof) against
any and all expenses, liabilities and losses (including, without limitation,
reasonable attorneys' fees and disbursements of counsel reasonably satisfactory
to the Company), incurred or suffered by the Employee in connection with his
service as an employee of the Company during the Term, in each case, except to
the extent of the Employee's negligence or willful misconduct.
(b) INSURANCE. The Company shall maintain, for the benefit of the
Employee, a director's and officer's or similar liability insurance policy,
insuring the Employee's service hereunder in accordance with its customary
practices for its senior executive officers in effect from time to time during
the Term and for at least six years thereafter with respect to actions and/or
failures to act during the Employee's employment under this Agreement.
<PAGE> 10
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8. CONFIDENTIALITY; NON-COMPETITION.
(a) CONFIDENTIALITY. During the Term and thereafter, the Employee
agrees not to disclose to others all secret, confidential or proprietary
information, knowledge or data relating to the Company (and/or any of its
affiliates) which shall have been obtained by the Employee during or by reason
of the Employee's employment by the Company, in accordance with the principles
of NRS 600A.010 et seq. (the so-called Uniform Trade Secrets Act, as amended and
in effect from time to time and including judicial interpretations thereof);
provided, however, that the foregoing shall not apply to any such information,
knowledge or data that becomes publicly available other than as a result of a
breach of the Employee's undertakings hereunder or that is required by law or
regulation to be disclosed by the Employee or that is necessary to disclose in
connection with any judicial, regulatory or administrative proceeding or that is
disclosed by the Employee in good faith in the course of the performance of his
duties hereunder. During the Term, the Employee shall not, without the prior
written consent of the Company, communicate or divulge any such information,
knowledge or data to any person or entity other than the Company (and/or its
applicable affiliates) and those designated by any of them that would result in
any misappropriation under and as defined in such Act, except that, during the
Employee's employment hereunder, in furtherance of the business and for the
benefit of the Company, the Employee may provide confidential information as
appropriate to attorneys, accountants, financial institutions or other persons
or entities engaged in business with the Company from time to time.
(b) NON-COMPETITION. Subject to Section 10 hereof, the Employee
agrees that he will not at any time during the Term and for a period of twelve
(12) months following the end of such Term, directly or indirectly, whether as
employee, owner, partner, agent, director, officer, consultant, equityholder
(except as the beneficial owner of not more than 5% of the outstanding shares of
a corporation, any of the capital stock of which is listed on any national or
regional securities exchange or quoted in the daily listing of over-the counter
market securities and, in each case, in which the Employee does not undertake
any management or operational or advisory role) or in any other capacity, for
his own account or for the benefit of any person or entity, establish, engage in
or be connected with, in any manner, any person or entity with respect to a
business conducted by that person or entity that is, on the applicable date, in
direct competition (other than competition in any immaterial respect and/or
competition that is in a business that is immaterial or insignificant to the
Company and its affiliates, taken as a whole) with the Company or any of its
primary affiliates in the gaming machine route, electronic gaming machine and/or
casino businesses; provided, however, that these restrictions shall not apply
after the end of the Term if the Employee's employment hereunder is terminated
by the Company other than for "Cause" or by the Employee for "Good Reason", each
as defined in Section 11.
<PAGE> 11
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9. NON-DISPARAGEMENT. Each of the Employee and the Company agrees
that during the Term and for a period of three (3) years following the end of
such Term, neither shall, publicly or privately, disparage or make any
statements (written or oral) that could impugn the integrity, acumen (business
or otherwise), ethics or business practices, of the other, except, in each case,
to the extent (but solely to the extent) necessary in any judicial or other
action to enforce the provisions of this Agreement or in connection with any
judicial, regulatory or administrative proceeding to the extent required by
applicable laws and regulations. For purposes of this Section 9, references to
the Company include its subsidiaries and other entities controlled by it and the
directors and executive officers of the Company on the date hereof and from time
to time hereafter.
10. PERMITTED ACTIVITIES. The Company expressly acknowledges and
agrees that, during the Term and thereafter, the Employee may be engaged in
other business activities that are not in direct competition (other than
competition in any immaterial respect and/or competition that is in a business
that is immaterial or insignificant to the Company and its affiliates, taken as
a whole) with the Company and/or any of its primary affiliates in the gaming
machine route, electronic gaming machine and/or casino businesses.
11. TERMINATION.
(a) BY THE COMPANY. The Company shall have the right to terminate
the Employee's employment under this Agreement for Cause (as defined herein)or
without Cause. For purposes of this Agreement, "Cause" shall mean the Employee's
(i) conviction of any misdemeanor involving moral turpitude or any felony, (ii)
denial (or revocation) of any required gaming license or permit issued by the
State of Nevada (or any applicable agency or political subdivision thereof) or
any other jurisdiction in which the denial (or revocation) of the Employee's
required gaming license or permit would materially adversely affect the business
of the Company and its affiliates (taken as a whole), or (iii) the persistent
and willful refusal by the Employee, in each case after written notice from the
Board or the chief executive officer of the Company (after consultation with the
Board) which sets forth in reasonable detail the basis for such notice, to
undertake the Employee's duties and obligations under this Agreement.
A termination for Cause under this Section 11(a) shall be effected
only by a written notice of the Board to the Employee that sets forth in
reasonable detail the basis for such termination; provided, however, that any
such notice shall not become effective if, within twenty-one (21) days after the
receipt thereof, the Employee shall correct, to the reasonable satisfaction a
majority of the Board (excluding the Employee), such act or failure to act that
is the basis for the termination of the Employee's employment for Cause.
<PAGE> 12
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Upon a termination of the Employee's employment for Cause becoming
effective, the Company shall pay or provide to the Employee (i) any accrued and
unpaid Base Salary, Bonuses and other compensation and benefits through the date
of termination, including, without limitation, Bonuses that may yet become
payable pursuant to the last sentence of Section 4(b) to the extent that any
Bonus pursuant to such last sentence is not prohibited by any applicable laws,
regulations and/or decisions of applicable regulatory agencies, (ii) expense
reimbursement amounts accrued through the date of termination, and (iii) any
amounts owed to the Employee under any deferral arrangements established under
Section 4(d) and/or any other plans or arrangements between the Employee and the
Company and/or any of its affiliates (but excluding the warrant extension
election provided in Section 4(d)) to the extent that any such payment or
election pursuant to this clause (iii) is not prohibited by any applicable laws,
regulations and/or decisions of applicable regulatory agencies, in each case, at
the time such payments, benefits and elections are otherwise due and/or payable,
and neither the Employee nor the Company shall have any further liability or
obligation to the other, except that the provisions of Sections 7, 8, 9, 10 and
12 shall continue in effect after the date of termination to the extent provided
in such Sections. However, if the Employee's employment is terminated by the
Company for Cause because of the Employee's conviction of a misdemeanor or
felony or the denial (or revocation) of a required permit or license, as
provided above, and thereafter the Employee's conviction or denial (or
revocation) is reversed, the Company shall pay to the Employee the Base Salary,
Bonuses and other compensation and benefits that the Employee would have
received as if the Employee's employment under this Agreement had not terminated
to the extent such payments are not prohibited by any applicable laws,
regulations and/or decisions of applicable regulatory agencies.
A termination of the Employee's employment hereunder without Cause
may be effected by the Company upon written notice to the Employee from the
Board. Notwithstanding such termination of employment, the Company will continue
to pay or provide to Employee (i) the Base Salary, Bonuses and other
compensation and benefits that would otherwise be payable to the Employee or
provided to or with respect to the Employee hereunder for the remainder of the
Term as if the Employee's employment under this Agreement had not terminated,
except that the Bonuses to be paid to the Employee under Section 4(b) for such
Employment Years (and portions thereof) after the date of such termination of
employment without Cause shall be an amount equal to the product of (x) the
highest aggregate Bonuses received by the Employee during and/or with respect to
any previous Employment Year (determined on an annualized basis for any partial
Employment Year) multiplied by (y) the number of Employment Years (and portions
thereof) remaining in the Term as if the Employee's employment under this
Agreement had not terminated, (ii) expense reimbursement amounts accrued through
the date of termination, and (iii) any amounts owed to the Employee under any
deferral arrangements established under Section 4(d) and/or any other plans or
arrangements between the Employee and the Company
<PAGE> 13
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and/or any of its affiliates (including, without limitation, providing to the
Employee any warrant extension election made or able to be made by the Employee
as provided in Section 4(d)), in each case, at the time such payments, benefits
and elections are otherwise due and/or payable, and neither the Employee nor the
Company shall have any further liability or obligation to the other, except that
the provisions of Sections 7, 8, 9, 10 and 12 shall continue in effect after the
date of termination to the extent provided in such Sections; provided, however,
that the Bonuses determined in clause (i) of this paragraph as the product of
clauses (x) and (y) shall be paid to the Employee by the Company in equal
monthly installments (commencing as of the first day of the month following the
date of termination) over the remaining Term as if the Employee's employment
under this Agreement had not terminated.
(b) BY THE EMPLOYEE. The Employee shall have the right to terminate
his employment under this Agreement for "Good Reason" (as defined herein) or
without Good Reason. For purposes of this Agreement, "Good Reason" shall mean
(i) the failure of the Company to pay to the Employee any portion of the
Employee's Base Salary or any Bonus or other compensation or benefits within ten
(10) business days of the time that any such amount is due and payable
hereunder, (ii) the assignment to the Employee of duties that are materially
inconsistent with those of a senior financial advisor to the Company, as set
forth in Section 3(a), or (iii) the failure of the Company to cause a successor
entity (or entities), as described in Section 12(a), specifically to adopt and
agree to be bound by this Agreement, which in each such case has not been cured
by the Company within twenty-one (21) days after receipt of written notice from
the Employee describing the basis for the Employee's determination of Good
Reason.
Upon the Employee's termination of this Agreement for Good Reason,
the Company will continue to pay or provide to the Employee (i) the Base Salary,
Bonuses and other compensation and benefits that would otherwise be payable to
the Employee or provided to or with respect to the Employee hereunder for the
remainder of the Term as if the Employee's employment under this Agreement had
not terminated, except that the Bonuses to be paid to the Employee under Section
4(b) for such Employment Years (and portions thereof) after the date of such
termination of employment for Good Reason shall be an amount equal to the
product of (x) the highest aggregate Bonuses received by the Employee during
and/or with respect to any previous Employment Year (determined on an annualized
basis for any partial Employment Year) multiplied by (y) the number of
Employment Years (and portions thereof) remaining in the Term as if the
Employee's employment under this Agreement had not terminated, (ii) expense
reimbursement amounts accrued through the date of termination, and (iii) any
amounts owed to the Employee under any deferral arrangements established under
Section 4(d) and/or any other plans or arrangements between the Employee and the
Company and/or any of its affiliates (including, without limitation, providing
to the Employee any warrant extension election made or able to
<PAGE> 14
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be made by the Employee as provided in Section 4(d)), in each case, at the time
such payments, benefits and elections are otherwise due and/or payable, and
neither the Employee nor the Company shall have any further liability or
obligation to the other, except that the provisions of Sections 7, 8, 9, 10 and
12 shall continue in effect after the date of termination to the extent provided
in such Sections; provided, however, that the Bonuses determined in clause (i)
of this paragraph as the product of clauses (x) and (y) shall be paid to the
Employee by the Company in equal monthly installments (commencing as of the
first day of the month following the date of termination) over the remaining
Term as if the Employee's employment under this Agreement had not terminated.
The Employee may terminate his employment under this Agreement
without Good Reason on 30 days written notice to the Company. Upon the
Employee's termination of this Agreement without Good Reason, the Company shall
pay or provide to the Employee (i) any accrued and unpaid Base Salary, Bonuses
and other compensation and benefits through the date of termination, including,
without limitation, Bonuses that may yet become payable pursuant to the last
sentence of Section 4(b), (ii) expense reimbursement amounts accrued through the
date of termination, and (iii) any amounts owed to the Employee under any
deferral arrangements established under Section 4(d) and/or any other plans or
arrangements between the Employee and the Company and/or any of its affiliates
(including, without limitation, providing to the Employee any warrant extension
election made or able to be made by the Employee as provided in Section 4(d)),
in each case, at the time such payments, benefits and elections are otherwise
due and/or payable, and neither the Employee nor the Company shall have any
further liability or obligation to the other, except that the provisions of
Sections 7, 8, 9, 10 and 12 shall continue in effect after the date of
termination to the extent provided in such Sections.
(c) EXPIRATION OF TERM. Upon the expiration of the Term without
further renewals, the Company will pay or provide to the Employee (i) any
accrued and unpaid Base Salary, Bonuses and other compensation and benefits
under this Agreement through the date of termination, including, without
limitation, Bonuses that may yet become payable pursuant to the last sentence of
Section 4(b), (ii) expense reimbursement amounts accrued through the date of
termination, and (iii) any amounts owed to the Employee under any deferral
arrangements established under Section 4(d) and/or any other plans or
arrangements between the Employee and the Company and/or any of its affiliates
(including, without limitation, providing to the Employee any warrant extension
election made or able to be made by the Employee as provided in Section 4(d)),
in each case, at the time such payments, benefits and elections are otherwise
due and/or payable, and neither the Employee nor the Company shall have any
further liability or obligation to the other, except that the provisions of
Sections 7, 8, 9, 10 and 12 shall continue in effect after the date of
termination to the extent provided in such Sections.
<PAGE> 15
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12. GENERAL PROVISIONS.
(a) ASSIGNMENT. Neither this Agreement nor any right or interest
hereunder shall be assignable by the Employee or the Company without the prior
written consent of the other, and this Agreement shall be binding upon the
successors and permitted assigns of each party hereto; provided, however, that
(i) in the event of the Employee's death during the Term, the Employee's estate
and the Employee's heirs, executors, administrators, legatees and distributees
shall have the rights set forth herein, as provided herein, and (ii) nothing
contained in this Agreement shall limit or restrict the ability of the Company
(and/or one or more of its affiliates) to merge or consolidate or effect any
similar transaction with any other entity, irrespective of whether the Company
is the surviving entity; provided, further, that any such surviving entity shall
succeed to, and shall continue to be bound by the provisions hereof binding upon
the Company as if such entity were deemed to be the Company under this
Agreement. For purposes of this Section 12(a), any entity (or related entities)
that as a result of a transaction and/or a series of transactions directly or
indirectly acquires substantially all of the assets (or the economic equivalent
thereof) of the Company and/or its affiliates shall be deemed to be a "surviving
entity" with respect to the Company.
(b) AMENDMENT; SEVERABILITY. This Agreement may not be modified or
amended except by an instrument in writing signed by the Employee and the
Company. If, for any reason, any provision of this Agreement is determined to be
invalid or unenforceable, such invalidity or lack of enforceability shall not
affect any other provision of this Agreement not so determined to be invalid or
unenforceable, and each such other provision shall, to the full extent
consistent with applicable law, continue in full force and effect, irrespective
of such invalid or unenforceable provision.
(c) EFFECT OF PRIOR AGREEMENTS. This Agreement contains the entire
understanding between the Employee and the Company respecting the Employee's
employment by the Company relating to time periods after June 30, 1997 and
supersedes any prior agreement between the Employee and the Company relating to
the Employee's providing advice or other services to the Company for such time
periods (except as otherwise provided in this Section). The Employee's prior
agreement with the Company dated as of March 20, 1995 shall be deemed to have
expired in accordance with its terms on June 30, 1997. Nothing contained in this
Agreement shall affect in any manner whatsoever any other agreements or
instruments executed on or prior to the date hereof between or among the
Employee or any of his affiliates on the one hand (including, without
limitation, Kirkland-Ft. Worth Investment Partners, L.P., Kirkland Investment
Corporation, Gaming Systems Advisors, L.P., or GSA, Inc.), and the Company or
any other party, on the other hand, including, without limitation, the
Employment Agreement Supplement dated as of August 29, 1996 between the Employee
and the Company, any options or warrants with respect to the stock of the
Company and any agreements relating to the operation of any such options or
<PAGE> 16
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warrants, except as expressly permitted or provided in this Agreement,
including, without limitation, in Section 4(d) and in Section 11.
(d) NOTICES. Notices and all other communications provided for in
this Agreement shall be in writing and shall be deemed to have been duly given
(i) when delivered, if sent by telecopy or by hand, (ii) one business day after
sending, if sent by reputable overnight courier service, such as Federal
Express, or (iii) three business days after being mailed, if sent by United
States certified or registered mail, return receipt requested, postage prepaid.
Notices shall be sent by one of the methods described above; provided, that any
notice sent by telecopy shall also be sent by any other method permitted above.
Notices shall be sent, if to the Employee to 25 Grace Court, Brooklyn, New York
11201; telecopy no. (718) 596-3038; and if to the Company, to Alliance Gaming
Corporation, 6601 South Bermuda Road, Las Vegas, Nevada 89119, telecopy no.
(702) 270-7699, directed to the attention of the chief executive officer with
copies to the Chairman of the Board and the Secretary of the Company; or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
(e) COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
(f) DISPUTES. In the event that a claim or claims by the Employee
(or with respect to the Employee) for payment, benefits and/or elections under
this Agreement is disputed, the Company shall pay all reasonable attorney fees
and expenses incurred by the Employee in pursuing such claim or claims, provided
that the Employee is successful as to at least a material part of the disputed
claim or claims by reason of litigation, arbitration or settlement; and the
Company shall bear the burden of proving that the Employee is not entitled to
such reimbursement. In addition, the Company shall pay or reimburse the Employee
for all legal fees and expenses incurred by the Employee in connection with the
preparation and negotiation of this Agreement.
(g) WAIVERS, ETC. Neither the failure nor any delay on the part of
either party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence.
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(h) HEADINGS. The headings of sections and paragraphs herein are
included solely for convenience of reference and shall not control the meaning
or interpretation of any of the provisions of this Agreement.
(i) GOVERNING LAW. The validity, interpretation, performance, and
enforcement of this Agreement shall be governed by the laws of the State of
Nevada, without regard to principles of conflicts of law.
(j) REGULATORY MATTERS. The obligations of the Company herein are
subject to applicable regulatory approvals, including, without limitation,
applicable gaming-related regulators.
(k) SURVIVAL. This Section 12 shall continue in effect after the
date of the termination of the Employee's employment under this Agreement.
If the foregoing terms meet with your approval, please indicate your
acceptance by signing and returning the enclosed copy of this letter to the
Company, whereupon it will become a binding agreement between you and the
Company.
Very truly yours,
Alliance Gaming Corporation
By
----------------------------------
Title:
ACCEPTED AND AGREED: Date:
----------------------------------
- ----------------------------------------
Date:-----------------------------------
<PAGE> 1
EXHIBIT 10.77
EMPLOYMENT AGREEMENT
AGREEMENT dated as of July 1, 1997 (the "Agreement") by and between
ALLIANCE GAMING CORPORATION, a Nevada corporation (the "Company"), and ANTHONY
L. DICESARE, an individual (the "Employee").
R E C I T A L S:
A. The Company considers it important and in its best interest and
the best interest of its stockholders to secure the long-term engagement of key
senior personnel who have substantial experience and knowledge in both the
financial markets and the gaming industry, and the Company desires to retain the
services of the Employee, on the terms and subject to the conditions provided in
this Agreement.
B. The Employee desires to accept such engagement by the Company and
to render services to the Company, on the terms and subject to the conditions
provided in this Agreement.
A G R E E M E N T:
1. EMPLOYMENT. The Company hereby agrees to retain the services of
the Employee, and the Employee agrees to be retained by the Company as an
employee to render services to the Company upon the terms and conditions set
forth in this Agreement.
2. TERM. The term of the Employee's employment under this Agreement
shall be five (5) years commencing as of July 1, 1997 (the "Term"), unless
earlier terminated as provided in this Agreement; provided, however, that the
Term shall automatically be extended on June 30, 2002 and each subsequent June
30 for an additional one (1) year period unless, not later than six (6) months
prior to any such date, either party to this Agreement shall have given written
notice to the other party that he or it does not wish to extend, or further
extend, the Term.
3. DUTIES AND LOCATION.
(a) DUTIES. The Employee will be available, at the reasonable
request of the Board of Directors of the Company (the "Board") and/or the chief
executive officer of the Company, to work on major strategic transactions
involving the Company and/or one or more of its affiliates, including, without
limitation, mergers, acquisitions, divestitures, joint
<PAGE> 2
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ventures, the negotiation of strategic alliances or relationships and financing
and refinancing transactions of all types. The Employee will report directly and
only to the Board and/or the chief executive officer of the Company, as
appropriate. The Employee's role in such matters, and in all activities to be
undertaken by the Employee under this Agreement, is to be consistent with that
of a senior financial advisor retained directly by the Board and/or the chief
executive officer of the Company, and the Employee is not expected to be
involved in matters relating to the day-to-day operation of the Company or any
of its affiliates.
The Employee will devote to the Company a portion of his business
time sufficient for him reasonably to fulfill his duties hereunder. However, the
Company explicitly acknowledges and agrees that the Employee is expected to
devote only a portion of his business time to the Company and/or its affiliates,
and that the Employee will pursue during the Term substantial business interests
other than the Employee's obligations under this Agreement.
(b) LOCATION. It is contemplated that the Employee will provide
services to the Company under this Agreement from an office in the New York
area. However, the Employee acknowledges and agrees that he may be required to
travel frequently from time to time during the Term in order to perform his
duties hereunder (including, without limitation, trips to Las Vegas, Nevada).
4. COMPENSATION.
(a) BASE SALARY. For purposes of this Agreement, each consecutive
12-month period ending on each June 30 during the Term shall be referred to as
an "Employment Year". For services rendered by the Employee under this Agreement
(and for the Employee agreeing to be available to provide such services), the
Company shall pay the Employee as compensation during each Employment Year
during the Term a Base Salary of $150,000 per year (prorated for any partial
Employment Years); provided, however, that such Base Salary shall be increased
as of July 1 of each year during the Term at a rate equal to the percentage
increase in the consumer price index for the New York - Northern New Jersey -
Long Island, NY-NJ-CT metropolitan area as reported by the U.S. Department of
Labor for the immediately preceding 12-month period, and such increased amount
shall thereupon become the "Base Salary" for all purposes under this Agreement.
The Base Salary shall be payable in equal bi-weekly installments, commencing
with the end of the regular pay period of the Company that next follows the
commencement of the Term.
(b) BONUSES. The Employee is entitled to, and the Company hereby
agrees to pay to the Employee, performance bonuses (the "Bonuses") during the
Term pursuant to the arrangements described in this Section 4(b). Prior to the
commencement of each Employment Year during the Term, the Board and the Employee
shall agree upon
<PAGE> 3
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appropriate performance goals for the Company for such Employment Year (which
goals will generally relate, without limitation, to mergers, acquisitions,
divestitures, joint ventures, strategic alliances, financings, refinancings
and/or similar transactions) involving the Company (and/or one or more of its
affiliates) and the target amount (and/or appropriate minimum amount) of Bonuses
to be paid to the Employee if the various performance goals are met. More than
one Bonus may be paid during or with respect to each Employment Year, and each
Bonus payable to the Employee hereunder shall, unless an alternative arrangement
has been established pursuant to Section 4(d) below, be paid to the Employee by
the Company in cash as soon as practicable after the performance goal to which
such Bonus relates has been met, but no later than ten (10) business days after
such performance goal has been met. Performance goals that relate to a
transaction shall be deemed to have been met upon the closing of such
transaction.
For the Employment Year beginning July 1, 1997, the performance
goals are: (i) the closing by the Company and/or one or more of its affiliates
during the Employment Year of the Refinancing as set forth in the Offer to
Purchase and Consent Solicitation Statement dated July 3, 1997 or a
substantially similar transaction, as determined by the Board in its reasonable
and good faith judgment; (ii) the closing by the Company and/or one or more of
its affiliates during the Employment Year of at least one "significant merger"
(a "significant merger" is defined as a merger, acquisition, divestiture, joint
venture, strategic alliance or similar transaction (or a series of related
transactions) with a value equal to or greater than $60 million); and/or (iii)
the closing by the Company and/or one or more of its affiliates during the
Employment Year of at least one "significant financing" (a "significant
financing" is defined as a financing, refinancing or similar transaction (or a
series of related transactions) with a value equal to or greater than $50
million); provided, however, that if for the Employment Year beginning July 1,
1997 and/or any subsequent Employment Year a significant financing is directly
related to a significant merger and closes within ten (10) business days before
or after the closing of such significant merger, and each such transaction would
cause a performance goal to be met during or with respect to such Employment
Year, only one of such performance goals - the one that results in the highest
Bonus amount - shall be deemed to have been met with respect to such related
transactions during or with respect to that Employment Year for purposes of this
Section 4(b). For this purpose, the "value" of a transaction shall be (x) with
respect to a merger, acquisition, joint venture, strategic alliance or similar
transaction, the aggregate value of the consideration paid, exchanged,
committed, invested or received by the Company (and/or any of its subsidiaries
or other entities controlled by the Company) with respect to the transaction
plus the aggregate principal amount of all debt incurred or assumed by the
Company (and/or any of its subsidiaries or other entities controlled by the
Company) in connection with the transaction, and (y) with respect to a
divestiture, financing, refinancing or similar transaction, the gross proceeds
(prior to reduction for any fees and expenses) paid to, made available to,
received by or to be invested in the Company (and/or any of its subsidiaries or
<PAGE> 4
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other entities controlled by the Company), whether or not disbursed, plus the
aggregate principal amount of any debt for which the Company (and/or any of its
subsidiaries or other entities controlled by the Company) is no longer liable.
Upon the achievement of the performance goal set forth in clause (i)
of the preceding paragraph, the Company shall pay the Employee a Bonus of
$950,000. Upon the achievement of the performance goal set forth in clause (ii)
of the preceding paragraph, the Company shall pay the Employee a minimum Bonus
of $200,000 for each significant merger. Upon the achievement of the performance
goal set forth in clause (iii) of the preceding paragraph, the Company shall pay
the Employee a minimum Bonus of $125,000 for each significant financing. The
Company shall pay each such Bonus in cash as soon as practicable after the
closing of the transaction that causes the related performance goal to be met,
but no later than ten (10) business days after such performance goal has been
met. If a performance goal is only partially achieved within an Employment Year,
the Board shall determine, in its reasonable and good faith judgment, what
amount of reduced Bonus, if any, shall be paid to the Employee with respect to
such performance goal during or with respect to such Employment Year.
The Board and the Employee agree that similar annual performance
goals and appropriate minimum and/or target Bonuses will be agreed to with
respect to each subsequent Employment Year during the Term. If, after reasonable
and good faith negotiation, the Board and the Employee cannot agree upon
reasonable annual performance goals and minimum and/or target Bonuses with
respect to such goals for any subsequent Employment Year, the Company and the
Employee agree that the performance goals set forth in clauses (ii) and (iii) of
the second preceding paragraph and the corresponding minimum Bonuses applicable
thereto in the immediately preceding paragraph shall be the performance goals
and minimum Bonuses for such subsequent Employment Year.
The Employee, upon 30 days notice to the Company, may elect to amend
or restructure his relationship with the Company to that of a financial
consultant or independent advisor, with compensation and other arrangements
reflecting the nature of such relationship and the services to be provided
(including, without limitation, choice of law provisions and provisions relating
to other permitted activities) in amounts reasonably consistent with the
compensation and Bonuses (including Special Bonuses pursuant to Section 4(c))
contemplated herein, in the reasonable and good faith judgment of the Board, but
calculated and payable in a manner customary for financial consultant or
independent advisor arrangements. Upon receipt of such notice, the Company and
the Employee will negotiate reasonably and in good faith to establish before the
end of the 30-day notice period a restructured agreement with respect to the
services contemplated to be provided hereunder.
<PAGE> 5
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The Company expressly acknowledges and agrees that the Employee will
be entitled to the Bonuses described above with respect to the attainment by the
Company and/or one or more of its affiliates of the established performance
goals, and each such Bonus will be paid by the Company to the Employee
regardless of whether the Employee is involved with the transaction or
transactions that resulted in the attainment of the performance goal, so long as
the Employee otherwise fulfills, in all material respects, his obligations to
the Company under Section 3(a). Further, if the Company and/or one or more of
its affiliates has taken material steps, as determined by the Board, in its
reasonable and good faith judgment, prior to the end of the Term towards a
significant merger and/or a significant financing and a performance goal to
which any such significant merger and/or significant financing relates is met
within nine (9) months after the end of the Term (or within twenty-one (21)
months of the end of the Term in the case of a transaction that does not close
within such nine (9) month period primarily because required regulatory
approval(s) has not been obtained), the Company shall pay to the Employee as
provided above the Bonuses that would have been payable to the Employee pursuant
to this Section 4(b) upon the closing of such transaction(s).
(c) SPECIAL BONUSES. In addition to the Base Salary and Bonuses
described above, the Board, in its sole discretion, may from time to time
determine to pay the Employee additional direct compensation in the nature of a
special bonus award (a "Special Bonus"), if it determines that the Employee has
provided services of special or exceptional value to the Company. The Employee
shall also be eligible to receive from time to time, in the sole discretion of
the Board or a committee of the Board, stock options and/or other awards with
respect to the stock of the Company.
(d) DEFERRAL OPPORTUNITIES. The Company agrees, subject to any
approvals required by applicable laws and/or regulations, that the Employee may
irrevocably elect, at any time prior to January 1, 1999, to forgo all or any
portion of any Bonuses to which the Employee may thereafter become entitled and
in lieu thereof to amend certain warrants beneficially owned by the Employee
and/or one or more of his affiliates that otherwise would expire on September
21, 1999 to extend their expiration date (and all applicable conditions with
respect to the exercise thereof) to June 18, 2002, and the Company will take all
necessary action to maintain the exempt status of any such extended warrants
under Section 16 of the Securities Exchange Act of 1934. The rate at which such
extension shall occur shall be such number of warrants (not more than three (3))
for each dollar of Bonuses foregone as the Board, in its reasonable and good
faith judgment, shall determine within ninety (90) days of the date of this
Agreement and after considering, among other things, the recommendation of an
investment banking, accounting or valuation firm with a national reputation.
(The Board shall retain such firm as soon as practicable after the date of this
Agreement, and the costs of obtaining such recommendation shall be borne by the
Company.)
<PAGE> 6
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At the election of the Employee (and/or one or more of his
affiliates that may then own any of such warrants), all or a portion of this
option to extend the expiration date of such warrants (and all applicable
conditions with respect to the exercise thereof) may also be effected by a
direct cash payment by the Employee (and/or any such affiliate) to the Company
on or prior to September 21, 1999 at the rate set forth in the prior paragraph,
rather than by the application of future Bonuses as set forth in this Section
4(d).
(e) BENEFITS. The Company will give the Employee the right to
participate in all of the benefit plans and programs maintained by the Company
for its senior executive officers and/or their dependents to the fullest extent
possible as if the Employee were employed by the Company on a full-time basis.
To the extent the Employee is not able to participate in any such benefit plan
or program, the Company will provide alternative arrangements to the Employee
(and/or his dependents, if applicable) so that, on an after-tax basis, the
Employee shall be in the same position as if the Employee had been a direct and
full participant in such plan or program; provided, however, that the maximum
amount required to be paid to the Employee pursuant to this sentence for or with
respect to an Employment Year shall not exceed $20,000, on an after-tax basis.
There shall be no material reduction or diminution of the benefits
provided in this Section 4(e) during the Term, unless (i) the Employee consents
to such reduction or diminution, (ii) an equitable arrangement (embodied in an
ongoing substitute or alternative benefit plan or program) has been made with
respect to the affected benefit plan or program or (iii) such reduction is part
of a program of across-the-board benefit reductions similarly affecting the
senior executive officers of the Company.
(f) ABSENCE AND SICK LEAVE. The Employee shall be entitled to such
reasonable periods of unavailability to provide services under this Agreement
because of vacation or illness comparable to those he would otherwise be
entitled to if he were a senior executive officer of the Company.
(g) FEDERAL INCOME TAX AND OTHER WITHHOLDINGS. The Company shall
withhold from any amount or benefits payable pursuant to this Agreement such
federal, state, city or other taxes and other amounts as may be required to be
withheld pursuant to any applicable law or governmental regulations or ruling
and shall timely pay over to the appropriate governmental authorities the
amounts withheld, together with any additional amounts required to be paid by
the Company (and/or any of its affiliates) in respect thereof.
5. REIMBURSEMENT OF EXPENSES. Consistent with established policies
of the Company as in effect from time to time for its senior executive officers,
the Company shall pay to or reimburse the Employee for all reasonable and actual
out-of-pocket expenses, including without limitation, travel, hotel and similar
expenses, incurred by the Employee
<PAGE> 7
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from time to time in performing his obligations under this Agreement; provided,
however, that any single expense item in excess of $5,000 must be approved by
the chief executive officer or the chief financial officer of the Company, which
approval shall not be unreasonably withheld or delayed.
6. PAYMENTS UPON DISABILITY OR DEATH.
(a) DISABILITY. During any period of Disability (as defined below)
occurring during the Term, the Company will continue to pay to the Employee the
full amount of the Base Salary, Bonuses and other compensation provided herein
and will continue to extend to the Employee the benefits described in Section 4
through the remainder of the Term, including, without limitation, Bonuses that
may yet become payable pursuant to the last sentence of Section 4(b); provided,
however, that if disability benefits are provided under any disability insurance
or similar policy maintained by the Company (or maintained by the Employee, with
the cost thereof being reimbursed or paid by the Company), payments under such
policy shall be considered as payments by the Company and shall offset any Base
Salary payable to the Employee under this Agreement. As used in this Agreement,
"Disability" shall mean the Employee's inability (as determined by a majority of
the members of the Board other than the Employee in their reasonable and good
faith judgment) to render services to the Company as contemplated by this
Agreement as a result of physical or mental infirmity on the basis of a written
medical opinion of an independent medical physician mutually acceptable to the
Company and the Employee. (If the Company and the Employee cannot agree on an
independent medical physician, each shall appoint one medical physician and
those two physicians shall appoint a third physician who shall render such
opinion. Each of the Company and the Employee shall appoint such medical
physician within five (5) business days of receiving written notice from the
other party requesting such appointment, and if such requested appointment is
not made within such five (5) business day period, the party failing to appoint
a medical physician shall be deemed to have accepted the medical physician
appointed by the other party.) In no event shall the Employee be considered
Disabled for purposes of this Agreement unless he is determined to be disabled
under the Company's regular long-term disability plan.
If the Employee is determined by the Board to be Disabled and such
Disability then continues for a period of an aggregate of five (5) months during
any eight (8) consecutive month period after such determination, the Board shall
have the right to terminate the Employee's employment under this Agreement upon
fifteen (15) days notice to the Employee if it determines, in its reasonable and
good faith judgment on the basis of a second written medical opinion of an
independent medical physician (selected as described above), that the Employee
will not be able to resume providing the services contemplated by this Agreement
within a reasonable period of time after the date of such proposed termination.
<PAGE> 8
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Upon the termination of the Employee's employment on account of
Disability pursuant to the preceding paragraph, the Employee's employment shall
terminate as of the effective date of the Board's final determination; provided,
however, that the Employee's employment shall be deemed to have terminated as of
the end of the fifteenth (15) month following the month in which such
termination decision by the Board is effective for purposes of all payments,
Base Salary, Bonuses, compensation, benefits, elections and other rights and
entitlements of the Employee under this Agreement, which shall continue to be
paid, provided or made available to the Employee during the fifteen (15) month
period as they would otherwise become due and/or payable as if the Employee's
employment under this Agreement had not terminated. After the completion of this
fifteen (15) month period, the Company will pay or provide to the Employee, to
the extent not otherwise paid or provided to the Employee in the normal course
during the fifteen (15) month period, (i) any accrued but unpaid Base Salary,
Bonuses and other compensation and benefits under this Agreement through the
date of deemed termination, including, without limitation, Bonuses that may yet
become payable pursuant to the last sentence of Section 4(b), (ii) expense
reimbursement amounts accrued through the date of deemed termination, and (iii)
any amounts owed to the Employee under any deferral arrangements established
under Section 4(d) and/or any other plans or arrangements between the Employee
and the Company and/or any of its affiliates (including, without limitation,
providing to the Employee (or his representative) any warrant extension election
made or able to be made by the Employee as provided in Section 4(d)), in each
case, at the time such payments, benefits and elections are otherwise due and/or
payable, and neither the Employee nor the Company shall have any further
liability or obligation to the other, except that the provisions of Sections 7,
8, 9, 10 and 12 shall continue in effect after the date of termination to the
extent provided in such Sections.
Notwithstanding any such Disability, during the remainder of the
Term, the Employee shall, to the extent that the Employee is physically and
mentally reasonably able to do so, furnish information, assistance and services
to the Company, and, upon the reasonable request in writing on behalf of the
Board (as determined by a majority of the members of the Board other than the
Employee) from time to time, the Employee shall make himself reasonably
available to perform a portion of the Employee's duties hereunder that is
reasonably consistent with the Employee's physical and mental health.
(b) DEATH. In the event of the Employee's death during the Term, the
Employee's employment shall terminate as of the date of death; provided,
however, that for purposes of all payments, Base Salary, Bonuses, compensation,
benefits, elections and other rights and entitlements of the Employee under this
Agreement, the Employee's employment shall be deemed to have terminated as of
the end of the fifteenth (15) month following the month in which the Employee's
death occurs, and, after the completion of this fifteen (15) month period, the
Company will pay or provide to the beneficiary(ies) designated by the
<PAGE> 9
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Employee from time to time in a written notice to the Company (or, in the
absence of an effective designation of beneficiary(ies) on the date of the
Employee's death, to the Employee's estate), to the extent not otherwise paid or
provided in the normal course during the fifteen (15) month period, (i) any
accrued but unpaid Base Salary, Bonuses and other compensation and benefits
under this Agreement through the date of deemed termination, including, without
limitation, Bonuses that may yet become payable pursuant to the last sentence of
Section 4(b), (ii) expense reimbursement amounts accrued through the date of
deemed termination, and (iii) any amounts owed to the Employee under any
deferral arrangements established under Section 4(d) and/or any other plans or
arrangements between the Employee and the Company and/or any of its affiliates
(including, without limitation, providing to such beneficiaries any warrant
extension election made or able to be made by the Employee as provided in
Section 4(d)), in each case, at the time such payments, benefits and elections
are otherwise due and/or payable, and neither the Employee nor the Company shall
have any further liability or obligation to the other, except that the
provisions of Sections 7 and 12 shall continue in effect after the date of
termination to the extent provided in such Sections for the benefit of the
Employee's designated beneficiary(ies) and the Employee's estate. All payments,
Base Salary, Bonuses, compensation, benefits, elections and other rights and
entitlements that the Company is or may become obligated to pay or provide to or
with respect to the Employee during the fifteen (15) month period described in
the first sentence of this Section 6(b) shall be paid to or provided to the
Employee's designated beneficiary(ies) or estate, as appropriate.
7. INDEMNIFICATION AND LIABILITY INSURANCE.
(a) INDEMNIFICATION. During the Term and thereafter, the Company
shall indemnify and hold the Employee harmless, to the fullest extent legally
permitted by Section 78.751 of the Nevada Revised Statutes (as amended and in
effect from time to time and including judicial interpretations thereof) against
any and all expenses, liabilities and losses (including, without limitation,
reasonable attorneys' fees and disbursements of counsel reasonably satisfactory
to the Company), incurred or suffered by the Employee in connection with his
service as an employee of the Company during the Term, in each case, except to
the extent of the Employee's negligence or willful misconduct.
(b) INSURANCE. The Company shall maintain, for the benefit of the
Employee, a director's and officer's or similar liability insurance policy,
insuring the Employee's service hereunder in accordance with its customary
practices for its senior executive officers in effect from time to time during
the Term and for at least six years thereafter with respect to actions and/or
failures to act during the Employee's employment under this Agreement.
<PAGE> 10
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8. CONFIDENTIALITY; NON-COMPETITION.
(a) CONFIDENTIALITY. During the Term and thereafter, the Employee
agrees not to disclose to others all secret, confidential or proprietary
information, knowledge or data relating to the Company (and/or any of its
affiliates) which shall have been obtained by the Employee during or by reason
of the Employee's employment by the Company, in accordance with the principles
of NRS 600A.010 et seq. (the so-called Uniform Trade Secrets Act, as amended and
in effect from time to time and including judicial interpretations thereof);
provided, however, that the foregoing shall not apply to any such information,
knowledge or data that becomes publicly available other than as a result of a
breach of the Employee's undertakings hereunder or that is required by law or
regulation to be disclosed by the Employee or that is necessary to disclose in
connection with any judicial, regulatory or administrative proceeding or that is
disclosed by the Employee in good faith in the course of the performance of his
duties hereunder. During the Term, the Employee shall not, without the prior
written consent of the Company, communicate or divulge any such information,
knowledge or data to any person or entity other than the Company (and/or its
applicable affiliates) and those designated by any of them that would result in
any misappropriation under and as defined in such Act, except that, during the
Employee's employment hereunder, in furtherance of the business and for the
benefit of the Company, the Employee may provide confidential information as
appropriate to attorneys, accountants, financial institutions or other persons
or entities engaged in business with the Company from time to time.
(b) NON-COMPETITION. Subject to Section 10 hereof, the Employee
agrees that he will not at any time during the Term and for a period of twelve
(12) months following the end of such Term, directly or indirectly, whether as
employee, owner, partner, agent, director, officer, consultant, equityholder
(except as the beneficial owner of not more than 5% of the outstanding shares of
a corporation, any of the capital stock of which is listed on any national or
regional securities exchange or quoted in the daily listing of over-the counter
market securities and, in each case, in which the Employee does not undertake
any management or operational or advisory role) or in any other capacity, for
his own account or for the benefit of any person or entity, establish, engage in
or be connected with, in any manner, any person or entity with respect to a
business conducted by that person or entity that is, on the applicable date, in
direct competition (other than competition in any immaterial respect and/or
competition that is in a business that is immaterial or insignificant to the
Company and its affiliates, taken as a whole) with the Company or any of its
primary affiliates in the gaming machine route, electronic gaming machine and/or
casino businesses; provided, however, that these restrictions shall not apply
after the end of the Term if the Employee's employment hereunder is terminated
by the Company other than for "Cause" or by the Employee for "Good Reason", each
as defined in Section 11.
<PAGE> 11
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9. NON-DISPARAGEMENT. Each of the Employee and the Company agrees
that during the Term and for a period of three (3) years following the end of
such Term, neither shall, publicly or privately, disparage or make any
statements (written or oral) that could impugn the integrity, acumen (business
or otherwise), ethics or business practices, of the other, except, in each case,
to the extent (but solely to the extent) necessary in any judicial or other
action to enforce the provisions of this Agreement or in connection with any
judicial, regulatory or administrative proceeding to the extent required by
applicable laws and regulations. For purposes of this Section 9, references to
the Company include its subsidiaries and other entities controlled by it and the
directors and executive officers of the Company on the date hereof and from time
to time hereafter.
10. PERMITTED ACTIVITIES. The Company expressly acknowledges and
agrees that, during the Term and thereafter, the Employee may be engaged in
other business activities that are not in direct competition (other than
competition in any immaterial respect and/or competition that is in a business
that is immaterial or insignificant to the Company and its affiliates, taken as
a whole) with the Company and/or any of its primary affiliates in the gaming
machine route, electronic gaming machine and/or casino businesses.
11. TERMINATION.
(a) BY THE COMPANY. The Company shall have the right to terminate
the Employee's employment under this Agreement for Cause (as defined herein)or
without Cause. For purposes of this Agreement, "Cause" shall mean the Employee's
(i) conviction of any misdemeanor involving moral turpitude or any felony, (ii)
denial (or revocation) of any required gaming license or permit issued by the
State of Nevada (or any applicable agency or political subdivision thereof) or
any other jurisdiction in which the denial (or revocation) of the Employee's
required gaming license or permit would materially adversely affect the business
of the Company and its affiliates (taken as a whole), or (iii) the persistent
and willful refusal by the Employee, in each case after written notice from the
Board or the chief executive officer of the Company (after consultation with the
Board) which sets forth in reasonable detail the basis for such notice, to
undertake the Employee's duties and obligations under this Agreement.
A termination for Cause under this Section 11(a) shall be effected
only by a written notice of the Board to the Employee that sets forth in
reasonable detail the basis for such termination; provided, however, that any
such notice shall not become effective if, within twenty-one (21) days after the
receipt thereof, the Employee shall correct, to the reasonable satisfaction a
majority of the Board (excluding the Employee), such act or failure to act that
is the basis for the termination of the Employee's employment for Cause.
<PAGE> 12
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Upon a termination of the Employee's employment for Cause becoming
effective, the Company shall pay or provide to the Employee (i) any accrued and
unpaid Base Salary, Bonuses and other compensation and benefits through the date
of termination, including, without limitation, Bonuses that may yet become
payable pursuant to the last sentence of Section 4(b) to the extent that any
Bonus pursuant to such last sentence is not prohibited by any applicable laws,
regulations and/or decisions of applicable regulatory agencies, (ii) expense
reimbursement amounts accrued through the date of termination, and (iii) any
amounts owed to the Employee under any deferral arrangements established under
Section 4(d) and/or any other plans or arrangements between the Employee and the
Company and/or any of its affiliates (but excluding the warrant extension
election provided in Section 4(d)) to the extent that any such payment or
election pursuant to this clause (iii) is not prohibited by any applicable laws,
regulations and/or decisions of applicable regulatory agencies, in each case, at
the time such payments, benefits and elections are otherwise due and/or payable,
and neither the Employee nor the Company shall have any further liability or
obligation to the other, except that the provisions of Sections 7, 8, 9, 10 and
12 shall continue in effect after the date of termination to the extent provided
in such Sections. However, if the Employee's employment is terminated by the
Company for Cause because of the Employee's conviction of a misdemeanor or
felony or the denial (or revocation) of a required permit or license, as
provided above, and thereafter the Employee's conviction or denial (or
revocation) is reversed, the Company shall pay to the Employee the Base Salary,
Bonuses and other compensation and benefits that the Employee would have
received as if the Employee's employment under this Agreement had not terminated
to the extent such payments are not prohibited by any applicable laws,
regulations and/or decisions of applicable regulatory agencies.
A termination of the Employee's employment hereunder without Cause
may be effected by the Company upon written notice to the Employee from the
Board. Notwithstanding such termination of employment, the Company will continue
to pay or provide to Employee (i) the Base Salary, Bonuses and other
compensation and benefits that would otherwise be payable to the Employee or
provided to or with respect to the Employee hereunder for the remainder of the
Term as if the Employee's employment under this Agreement had not terminated,
except that the Bonuses to be paid to the Employee under Section 4(b) for such
Employment Years (and portions thereof) after the date of such termination of
employment without Cause shall be an amount equal to the product of (x) the
highest aggregate Bonuses received by the Employee during and/or with respect to
any previous Employment Year (determined on an annualized basis for any partial
Employment Year) multiplied by (y) the number of Employment Years (and portions
thereof) remaining in the Term as if the Employee's employment under this
Agreement had not terminated, (ii) expense reimbursement amounts accrued through
the date of termination, and (iii) any amounts owed to the Employee under any
deferral arrangements established under Section 4(d) and/or any other plans or
arrangements between the Employee and the Company
<PAGE> 13
- 13 -
and/or any of its affiliates (including, without limitation, providing to the
Employee any warrant extension election made or able to be made by the Employee
as provided in Section 4(d)), in each case, at the time such payments, benefits
and elections are otherwise due and/or payable, and neither the Employee nor the
Company shall have any further liability or obligation to the other, except that
the provisions of Sections 7, 8, 9, 10 and 12 shall continue in effect after the
date of termination to the extent provided in such Sections; provided, however,
that the Bonuses determined in clause (i) of this paragraph as the product of
clauses (x) and (y) shall be paid to the Employee by the Company in equal
monthly installments (commencing as of the first day of the month following the
date of termination) over the remaining Term as if the Employee's employment
under this Agreement had not terminated.
(b) BY THE EMPLOYEE. The Employee shall have the right to terminate
his employment under this Agreement for "Good Reason" (as defined herein) or
without Good Reason. For purposes of this Agreement, "Good Reason" shall mean
(i) the failure of the Company to pay to the Employee any portion of the
Employee's Base Salary or any Bonus or other compensation or benefits within ten
(10) business days of the time that any such amount is due and payable
hereunder, (ii) the assignment to the Employee of duties that are materially
inconsistent with those of a senior financial advisor to the Company, as set
forth in Section 3(a), or (iii) the failure of the Company to cause a successor
entity (or entities), as described in Section 12(a), specifically to adopt and
agree to be bound by this Agreement, which in each such case has not been cured
by the Company within twenty-one (21) days after receipt of written notice from
the Employee describing the basis for the Employee's determination of Good
Reason.
Upon the Employee's termination of this Agreement for Good Reason,
the Company will continue to pay or provide to the Employee (i) the Base Salary,
Bonuses and other compensation and benefits that would otherwise be payable to
the Employee or provided to or with respect to the Employee hereunder for the
remainder of the Term as if the Employee's employment under this Agreement had
not terminated, except that the Bonuses to be paid to the Employee under Section
4(b) for such Employment Years (and portions thereof) after the date of such
termination of employment for Good Reason shall be an amount equal to the
product of (x) the highest aggregate Bonuses received by the Employee during
and/or with respect to any previous Employment Year (determined on an annualized
basis for any partial Employment Year) multiplied by (y) the number of
Employment Years (and portions thereof) remaining in the Term as if the
Employee's employment under this Agreement had not terminated, (ii) expense
reimbursement amounts accrued through the date of termination, and (iii) any
amounts owed to the Employee under any deferral arrangements established under
Section 4(d) and/or any other plans or arrangements between the Employee and the
Company and/or any of its affiliates (including, without limitation, providing
to the Employee any warrant extension election made or able to
<PAGE> 14
- 14 -
be made by the Employee as provided in Section 4(d)), in each case, at the time
such payments, benefits and elections are otherwise due and/or payable, and
neither the Employee nor the Company shall have any further liability or
obligation to the other, except that the provisions of Sections 7, 8, 9, 10 and
12 shall continue in effect after the date of termination to the extent provided
in such Sections; provided, however, that the Bonuses determined in clause (i)
of this paragraph as the product of clauses (x) and (y) shall be paid to the
Employee by the Company in equal monthly installments (commencing as of the
first day of the month following the date of termination) over the remaining
Term as if the Employee's employment under this Agreement had not terminated.
The Employee may terminate his employment under this Agreement
without Good Reason on 30 days written notice to the Company. Upon the
Employee's termination of this Agreement without Good Reason, the Company shall
pay or provide to the Employee (i) any accrued and unpaid Base Salary, Bonuses
and other compensation and benefits through the date of termination, including,
without limitation, Bonuses that may yet become payable pursuant to the last
sentence of Section 4(b), (ii) expense reimbursement amounts accrued through the
date of termination, and (iii) any amounts owed to the Employee under any
deferral arrangements established under Section 4(d) and/or any other plans or
arrangements between the Employee and the Company and/or any of its affiliates
(including, without limitation, providing to the Employee any warrant extension
election made or able to be made by the Employee as provided in Section 4(d)),
in each case, at the time such payments, benefits and elections are otherwise
due and/or payable, and neither the Employee nor the Company shall have any
further liability or obligation to the other, except that the provisions of
Sections 7, 8, 9, 10 and 12 shall continue in effect after the date of
termination to the extent provided in such Sections.
(c) EXPIRATION OF TERM. Upon the expiration of the Term without
further renewals, the Company will pay or provide to the Employee (i) any
accrued and unpaid Base Salary, Bonuses and other compensation and benefits
under this Agreement through the date of termination, including, without
limitation, Bonuses that may yet become payable pursuant to the last sentence of
Section 4(b), (ii) expense reimbursement amounts accrued through the date of
termination, and (iii) any amounts owed to the Employee under any deferral
arrangements established under Section 4(d) and/or any other plans or
arrangements between the Employee and the Company and/or any of its affiliates
(including, without limitation, providing to the Employee any warrant extension
election made or able to be made by the Employee as provided in Section 4(d)),
in each case, at the time such payments, benefits and elections are otherwise
due and/or payable, and neither the Employee nor the Company shall have any
further liability or obligation to the other, except that the provisions of
Sections 7, 8, 9, 10 and 12 shall continue in effect after the date of
termination to the extent provided in such Sections.
<PAGE> 15
- 15 -
12. GENERAL PROVISIONS.
(a) ASSIGNMENT. Neither this Agreement nor any right or interest
hereunder shall be assignable by the Employee or the Company without the prior
written consent of the other, and this Agreement shall be binding upon the
successors and permitted assigns of each party hereto; provided, however, that
(i) in the event of the Employee's death during the Term, the Employee's estate
and the Employee's heirs, executors, administrators, legatees and distributees
shall have the rights set forth herein, as provided herein, and (ii) nothing
contained in this Agreement shall limit or restrict the ability of the Company
(and/or one or more of its affiliates) to merge or consolidate or effect any
similar transaction with any other entity, irrespective of whether the Company
is the surviving entity; provided, further, that any such surviving entity shall
succeed to, and shall continue to be bound by the provisions hereof binding upon
the Company as if such entity were deemed to be the Company under this
Agreement. For purposes of this Section 12(a), any entity (or related entities)
that as a result of a transaction and/or a series of transactions directly or
indirectly acquires substantially all of the assets (or the economic equivalent
thereof) of the Company and/or its affiliates shall be deemed to be a "surviving
entity" with respect to the Company.
(b) AMENDMENT; SEVERABILITY. This Agreement may not be modified or
amended except by an instrument in writing signed by the Employee and the
Company. If, for any reason, any provision of this Agreement is determined to be
invalid or unenforceable, such invalidity or lack of enforceability shall not
affect any other provision of this Agreement not so determined to be invalid or
unenforceable, and each such other provision shall, to the full extent
consistent with applicable law, continue in full force and effect, irrespective
of such invalid or unenforceable provision.
(c) EFFECT OF PRIOR AGREEMENTS. This Agreement contains the entire
understanding between the Employee and the Company respecting the Employee's
employment by the Company relating to time periods after June 30, 1997 and
supersedes any prior agreement between the Employee and the Company relating to
the Employee's providing advice or other services to the Company for such time
periods (except as otherwise provided in this Section). The Employee's prior
agreement with the Company dated as of March 31, 1995 shall be deemed to have
expired in accordance with its terms on June 30, 1997. Nothing contained in this
Agreement shall affect in any manner whatsoever any other agreements or
instruments executed on or prior to the date hereof between or among the
Employee or any of his affiliates on the one hand (including, without
limitation, Kirkland-Ft. Worth Investment Partners, L.P., Kirkland Investment
Corporation, Gaming Systems Advisors, L.P., or GSA, Inc.), and the Company or
any other party, on the other hand, including, without limitation, the
Employment Agreement Supplement dated as of August 29, 1996 between the Employee
and the Company, any options or warrants with respect to the stock of the
Company and any agreements relating to the operation of any such options or
<PAGE> 16
- 16 -
warrants, except as expressly permitted or provided in this Agreement,
including, without limitation, in Section 4(d) and in Section 11.
(d) NOTICES. Notices and all other communications provided for in
this Agreement shall be in writing and shall be deemed to have been duly given
(i) when delivered, if sent by telecopy or by hand, (ii) one business day after
sending, if sent by reputable overnight courier service, such as Federal
Express, or (iii) three business days after being mailed, if sent by United
States certified or registered mail, return receipt requested, postage prepaid.
Notices shall be sent by one of the methods described above; provided, that any
notice sent by telecopy shall also be sent by any other method permitted above.
Notices shall be sent, if to the Employee to 129 West 69th Street, #5, New York,
New York 10023; telecopy no. (212) 769-0869 (phone/fax) (with a copy to 1336 St.
Joseph Circle, Las Vegas, Nevada 89104); and if to the Company, to Alliance
Gaming Corporation, 6601 South Bermuda Road, Las Vegas, Nevada 89119, telecopy
no. (702) 270-7699, directed to the attention of the chief executive officer
with copies to the Chairman of the Board and the Secretary of the Company; or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
(e) COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
(f) DISPUTES. In the event that a claim or claims by the Employee
(or with respect to the Employee) for payment, benefits and/or elections under
this Agreement is disputed, the Company shall pay all reasonable attorney fees
and expenses incurred by the Employee in pursuing such claim or claims, provided
that the Employee is successful as to at least a material part of the disputed
claim or claims by reason of litigation, arbitration or settlement; and the
Company shall bear the burden of proving that the Employee is not entitled to
such reimbursement. In addition, the Company shall pay or reimburse the Employee
for all legal fees and expenses incurred by the Employee in connection with the
preparation and negotiation of this Agreement.
(g) WAIVERS, ETC. Neither the failure nor any delay on the part of
either party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence.
<PAGE> 17
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(h) HEADINGS. The headings of sections and paragraphs herein are
included solely for convenience of reference and shall not control the meaning
or interpretation of any of the provisions of this Agreement.
(i) GOVERNING LAW. The validity, interpretation, performance, and
enforcement of this Agreement shall be governed by the laws of the State of
Nevada, without regard to principles of conflicts of law.
(j) REGULATORY MATTERS. The obligations of the Company herein are
subject to applicable regulatory approvals, including, without limitation,
applicable gaming-related regulators.
(k) SURVIVAL. This Section 12 shall continue in effect after the
date of the termination of the Employee's employment under this Agreement.
If the foregoing terms meet with your approval, please indicate your
acceptance by signing and returning the enclosed copy of this letter to the
Company, whereupon it will become a binding agreement between you and the
Company.
Very truly yours,
Alliance Gaming Corporation
By
----------------------------------
Title:
ACCEPTED AND AGREED: Date:
----------------------------------
- ----------------------------------------
Date:
-----------------------------------
<PAGE> 1
EXHIBIT 10.78
[ALLIANCE GAMING LETTERHEAD]
July 1, 1997
Kirkland Investment Corporation
535 Madison Avenue
33rd Floor
New York, NY 10022
Ladies and Gentlemen:
This letter sets forth the agreement (the "Agreement") dated as of
July 1, 1997 of Alliance Gaming Corporation (the "Company") to pay the payments
set forth below to Kirkland Investment Corporation or its designee ("Kirkland")
for the five (5) year period commencing as of July 1, 1997; provided, however,
that the term of this Agreement shall automatically be extended on June 30, 2002
and each subsequent June 30 for an additional one (1) year period unless, not
later than six (6) months prior to any such date, either party to this Agreement
shall have given written notice to the other party that it does not wish to
extend, or further extend, such term.
The Company will pay to Kirkland $950,000 annually (in four (4)
quarterly installments payable in advance), beginning on July 1, 1997 and
continuing through June 30, 2002 or any extension of that date, plus the cost to
Kirkland of providing reasonable and customary employee benefits to its
secretarial and analyst support staff in its New York area office. The amount of
this annual payment shall be increased as of July 1 of each calendar year at a
rate equal to the percentage increase in the consumer price index for the New
York - Northern New Jersey - Long Island, NY-NJ-CT metropolitan area as reported
by the U.S. Department of Labor for the immediately preceding 12-month period.
In addition, the Company will reimburse Kirkland for reasonable
out-of-pocket expenses incurred by Kirkland and its officers and employees, so
long as such expenses relate directly to the business or potential business of
the Company; provided, however, that any single expense item in excess of $5,000
must be approved by the chief executive officer or the chief financial officer
of the Company, which approval shall not be unreasonably withheld or delayed.
The Company shall have the right to request from time to time that Kirkland
provide appropriate supporting documentation in respect of such reimbursements.
<PAGE> 2
- 2 -
The Company shall make payment to Kirkland for such expenses within thirty (30)
days of demand to the Company by Kirkland.
The Company explicitly acknowledges and agrees that Kirkland and its
officers and employees will also be engaged in a variety of other substantial
business activities that do not relate to the business of the Company.
Kirkland agrees that upon the effective date of the termination of
the employment of Joel Kirschbaum with the Company either (i) pursuant to
Section 6 of the Employment Agreement dated as of July 1, 1997 between Joel
Kirschbaum and the Company (the "Employment Agreement"), (ii) by the Company for
"cause" pursuant to Section 11(a) of the Employment Agreement, or (iii) by Joel
Kirschbaum without "good reason" pursuant to Section 11(b) of the Employment
Agreement, the Company shall have the right, upon 12 months prior notice to
Kirkland, to terminate this Agreement, and, within thirty (30) days after the
effective date of such termination of this Agreement, the Company shall pay to
Kirkland all payments that the Company is obligated to pay to or for the benefit
of Kirkland through such termination date, including, without limitation,
expense reimbursement amounts accrued through such termination date.
This Agreement contains the entire understanding between Kirkland
and the Company respecting the payments and expense reimbursements described
herein; provided, however, that nothing contained in this Agreement shall affect
any of the agreements or instruments executed on or prior to the date hereof
among Kirkland or any of its affiliates on the one hand (including without
limitation, Kirkland-Ft. Worth Investment Partners, L.P., Gaming Systems
Advisors, L.P., or GSA, Inc.), and the Company or any other party, on the other
hand, including, without limitation, any options or warrants with respect to
stock of the Company and any agreements relating to the operation of any such
options or warrants.
In the event that a claim or claims by Kirkland (or with respect to
Kirkland) for payment or benefits under this Agreement is disputed, the Company
shall pay all reasonable attorney fees and expenses incurred by Kirkland in
pursuing such claim or claims, provided that Kirkland is successful as to at
least a material part of the disputed claim or claims by reason of litigation,
arbitration or settlement; and the Company shall bear the burden of proving that
Kirkland is not entitled to such reimbursement. In addition, the Company shall
pay or reimburse Kirkland for all legal fees and expenses incurred by Kirkland
in connection with the preparation and negotiation of this Agreement.
Neither this Agreement nor any right or interest hereunder shall be
assignable by Kirkland or the Company without the prior written consent of the
other, and this agreement shall be binding upon the successors and permitted
assigns of each party hereto; however, Kirkland may assign its rights and
interests hereunder to any affiliate without such written consent from the
Company. Nothing contained in this Agreement shall limit or restrict the ability
of the Company (and/or one or more of its affiliates)to merge or
<PAGE> 3
- 3 -
consolidate or effect any similar transaction with any other entity,
irrespective of whether the Company is the surviving entity; provided, however,
that any such surviving entity shall succeed to, and shall continue to be bound
by the provisions hereof binding upon the Company as if such entity were deemed
to be the Company under this Agreement. For purposes of this paragraph, any
entity (or related entities) that as the result of a transaction and/or a series
of transactions directly or indirectly acquires substantially all of the assets
of the Company and/or its affiliates (or the economic equivalent thereof) shall
be deemed to be a "surviving entity" with respect to the Company.
Notices and all other communications provided for in this Agreement
shall be in writing and shall be deemed to have been duly given (i) when
delivered, if sent by telecopy or by hand, (ii) one business day after sending,
if sent by reputable overnight courier service, such as Federal Express, or
(iii) three business days after being mailed, if sent by United States certified
or registered mail, return receipt requested, postage prepaid. Notices shall be
sent by one of the methods described above; provided, however, that any notice
sent by telecopy shall also be sent by any other method permitted above. Notices
shall be sent, if to Kirkland to the address set forth above; and if to the
Company to Alliance Gaming Corporation, 6601 South Bermuda Road, Las Vegas,
Nevada 89119, telecopy no. (702) 270-7699, directed to the attention of the
chief executive officer with copies to the Chairman of the Board and the
Secretary of the Company, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.
This Agreement may not be modified or amended except by an
instrument in writing signed by Kirkland and the Company. If, for any reason,
any provision of this Agreement is determined to be invalid or unenforceable,
such invalidity or lack of enforceability shall not affect any other provision
of this Agreement not so determined to be invalid or unenforceable, and each
such other provision shall, to the full extent consistent with applicable law,
continue in full force and effect, irrespective of such invalid or unenforceable
provision. This Agreement has been executed and delivered in the State of New
York, and its validity, interpretation, performance, and enforcement shall be
governed by the laws of such State, without regard to principles of conflicts of
law.
This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
<PAGE> 4
- 4 -
If the foregoing terms meet with your approval, please indicate your
acceptance by signing and returning the enclosed copy of this letter to the
Company, whereupon it will become a binding agreement between Kirkland and the
Company.
Very truly yours,
Alliance Gaming Corporation
By
----------------------------------
Title:
ACCEPTED AND AGREED: Date:
----------------------------------
Kirkland Investment Corporation
By /s/ JOEL KIRSCHBAUM
-------------------------------------
Title: PRESIDENT
Date: 7/31/97
----------------------------------
<PAGE> 5
- 4 -
If the foregoing terms meet with your approval, please indicate your
acceptance by signing and returning the enclosed copy of this letter to the
Company, whereupon it will become a binding agreement between Kirkland and the
Company.
Very truly yours,
Alliance Gaming Corporation
By /s/ DAVID JOHNSON
----------------------------------
Title: Secretary, Senior Vice
President and General
Counsel
ACCEPTED AND AGREED: Date: 7/31/97
----------------------------------
Kirkland Investment Corporation
By /s/ JOEL KIRSCHBAUM
-------------------------------------
Title: PRESIDENT
Date: 7/31/97
----------------------------------
<PAGE> 1
EXHIBIT 10.79
KIRKLAND INVESTMENT CORPORATION
July 1, 1997
Alliance Gaming Corporation
6601 South Bermuda Road
Las Vegas, Nevada 89119
Re: Amendment to Agreement dated as of July 1, 1997
Ladies and Gentlemen:
Reference is made to the agreement dated as of July 1, 1997 (the
"Agreement") between Alliance Gaming Corporation (the "Company") and Kirkland
Investment Corporation or its designee ("Kirkland").
We have reviewed the operation of the Agreement and wish to amend
the Agreement to provide that the Company will (i) pay directly, effective as of
the date hereof, the rent and utilities associated with the Kirkland New York
area office, as well as the salaries, bonuses and employee benefits of the
secretarial and analyst support staff in that office, and (ii) upon written
notice from Kirkland, pay directly those additional overhead expenses that
Kirkland identifies to the Company, beginning within 10 business days after the
date of such notice.
Under this revised arrangement, all such costs and expenses as
designated pursuant to the preceding paragraph that are paid directly by the
Company shall be credited against, and shall reduce dollar for dollar, the
Company's obligation to make the $950,000 payment (as increased from time to
time under the Agreement), other than the cost of reasonable and customary
employee benefits for the Kirkland secretarial and analyst support staff, which
benefits costs shall not be so credited.
This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
<PAGE> 2
- 2 -
If the foregoing terms meet with your approval, please indicate your
acceptance by signing and returning the enclosed copy of this letter to
Kirkland, whereupon it will become a binding amendment to the Agreement between
Kirkland and the Company. All of the other provisions of the Agreement shall
remain in full force and effect.
Very truly yours,
Kirkland Investment Corporation
By /s/ JOEL KIRSCHBAUM
----------------------------------
Title: PRESIDENT
ACCEPTED AND AGREED: Date: 7/31/97
----------------------------------
Alliance Gaming Corporation
By
-------------------------------------
Title:
Date:
-----------------------------------
<PAGE> 3
- 2 -
If the foregoing terms meet with your approval, please indicate your
acceptance by signing and returning the enclosed copy of this letter to
Kirkland, whereupon it will become a binding amendment to the Agreement between
Kirkland and the Company. All of the other provisions of the Agreement shall
remain in full force and effect.
Very truly yours,
Kirkland Investment Corporation
By /s/ JOEL KIRSCHBAUM
----------------------------------
Title: PRESIDENT
ACCEPTED AND AGREED: Date: 7/31/97
----------------------------------
Alliance Gaming Corporation
By /s/ DAVID JOHNSON
-------------------------------------
Title: Secretary, Senior Vice President
and General Counsel
Date: 7-31-97
-----------------------------------
<PAGE> 1
EXHIBIT 21
Subsidiaries
All subsidiaries are wholly owned except as indicated.
Alliance Gaming Corporation
Alliance Holding Company
Bally Gaming International, Inc.
Bally Gaming, Inc.
Bally Gaming de Puerto Rico
BGI Australia Pty. Limited
Alliance Automaten GmbH & Co. KG (99%)
APT Games, Inc.
Plantation Investments, Inc.
United Coin Machine Co.
Bally Gaming Missouri, Inc.
Casino Electronics, Inc.
Foreign Gaming Ventures, Inc.
Alpine Willow Investments, Inc.
Kansas Alliance Corporation
Kansas Gaming Ventures, Inc.
Kansas Financial Partners, LLC (50%)
Kansas Gaming Partners, LLC (50%)
Louisiana Ventures, Inc.
Southern Video Services, Inc. (49%)
Video Distributing Services, Inc. (49%)
Video Services, Inc. (49%)
Mississippi Ventures, Inc.
United Gaming Rainbow
Rainbow Casino-Vicksburg Partnership, LP (a)
United Native American, Inc.
Native American Investment, Inc.
Alliance Automaten Verwaltungs GmbH
Alliance Automaten GmbH & Co. KG (1%)
Bally Wulff Automaten GmbH
Bally Wulff Vertriebs GmbH
Bally Gaming Int'l GmbH
Bally Wulff Beteiligungs GmbH
Bally Wulff Billiards GmbH
Bally Wulff Security GmbH
Erkens Vertriebs GmbH
Geda Automaten GmbH Grosshandel
Kupper GmbH
Westav Automaten GmbH
(a) There is a limited minority interest holder, for further
information see Item 1 "Business - Casino Operations".
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Alliance Gaming Corporation
We consent to incorporation by reference in registration statements (Nos.
33-45811, 33-45810, 333-25515, 333-20685, 333-10011 and 333-34077) on Forms S-3
and S-8 of Alliance Gaming Corporation of our report dated September 3, 1997,
relating to the consolidated balance sheets of Alliance Gaming Corporation and
Subsidiaries as of June 30, 1996 and 1997 and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three-year period ended June 30, 1997, which report appears in the
June 30, 1997 annual report on Form 10-K of Alliance Gaming Corporation.
KPMG Peat Marwick LLP
Las Vegas, Nevada
September 25, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXCERPTED
FROM FORM 10-K FOR THE YEAR ENDED JUNE 30, 1997
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 28,294
<SECURITIES> 0
<RECEIVABLES> 109,630
<ALLOWANCES> 21,929
<INVENTORY> 37,329
<CURRENT-ASSETS> 163,581
<PP&E> 125,621
<DEPRECIATION> 43,072
<TOTAL-ASSETS> 352,016
<CURRENT-LIABILITIES> 52,786
<BONDS> 0
0
12,368
<COMMON> 3,185
<OTHER-SE> 38,002
<TOTAL-LIABILITY-AND-EQUITY> 352,016
<SALES> 266,668
<TOTAL-REVENUES> 445,146
<CGS> 152,922
<TOTAL-COSTS> 270,907
<OTHER-EXPENSES> 123,721
<LOSS-PROVISION> 9,059
<INTEREST-EXPENSE> 26,626
<INCOME-PRETAX> 13,778
<INCOME-TAX> 7,993
<INCOME-CONTINUING> (6,198)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,198)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
