CREDIT AGREEMENT

Exhibit 10.1

CREDIT AGREEMENT

Dated as of August 4, 2008

by and among

PROGRESSIVE GAMING INTERNATIONAL CORPORATION,

as Borrower

THE SUBSIDIARIES OF BORROWER PARTY HERETO

THE LENDERS FROM TIME TO TIME PARTY HERETO

and

PRIVATE EQUITY MANAGEMENT GROUP FINANCIAL CORPORATION,

as Administrative Agent

TABLE OF CONTENTS

 

 

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SCHEDULES

 

EXHIBITS

 

 

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CREDIT AGREEMENT

This Credit Agreement, dated as of August 4, 2008, is made by and among PROGRESSIVE GAMING INTERNATIONAL CORPORATION , a Nevada corporation (the “ Borrower ”), each subsidiary of the Borrower listed as a “Guarantor” on the signature pages hereto (together with each other Person which guarantees, pursuant to Section 6.01(b) of this Agreement or otherwise, all or any part of the Obligations, each a “ Guarantor ” and collectively, jointly and severally, the “ Guarantors ”), the lenders from time to time party hereto (each a “ Lender ” and collectively, the “ Lenders ”), and PRIVATE EQUITY MANAGEMENT GROUP FINANCIAL CORPORATION , a California corporation, as administrative agent for the Lenders (in such capacity, together with any successor administrative agent, the “ Administrative Agent ”).

In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

ARTICLE I

DEFINITIONS; CERTAIN TERMS

Section 1.01 Definitions. As used in this Agreement, the following terms shall have the respective meanings indicated below, such meanings to be applicable equally to both the singular and plural forms of such terms:

“ Account Debtor ” means any Person who is or who may become obligated under, with respect to, or on account of, an Account Receivable, chattel paper, or a general intangible.

“ Account Receivable ” means, with respect to any Person, all of such Person’s now owned or hereafter acquired right, title, and interest with respect to “accounts” (as that term is defined in Article 9 of the Code), including without limitation, accounts, accounts receivables, monies due or to become due and obligations in any form (whether arising in connection with contracts, contract rights, “instruments,” “general intangibles” or “chattel paper” (as such quoted terms are defined in Article 9 of the Code)), in each case whether arising out of goods sold or services rendered or from any other transaction and whether or not earned by performance, now or hereafter in existence, and any and all “supporting obligations” (as that term is defined in the Code) in respect thereof.

“ Acquisition ” means (a) any Stock Acquisition, or (b) any Asset Acquisition.

“ Action ” has the meaning specified therefor in Section 11.12.

“ additional amount ” has the meaning specified therefor in Section 2.08(a).

“ Adjusted Consolidated EBITDA ” means, for any Measurement Period, Consolidated Net Income of Borrower and its Subsidiaries for that period plus (a) the following to the extent deducted in calculating such Consolidated Net Income (but without duplication):

(i) Consolidated Interest Charges,

(ii) the provision for Federal, state, local and foreign income taxes payable,

(iii) depreciation and amortization expense,

(iv) other non-recurring expenses reducing such Consolidated Net Income which do not represent a cash item in such period or any future period,

(v) to the extent actually paid during such period, fees and expenses related to the consummation of the transactions contemplated to be closed on the Initial Funding Date under this Agreement, in each case of or by the Borrower and its Subsidiaries for such Measurement Period, and

(vi) non-cash employee and supplier/contractor compensation (including non-cash stock compensation expense recorded pursuant to FASB 123R); and

minus (b) the following to the extent not deducted in calculating such Consolidated Net Income (but without duplication):

(i) Federal, state, local and foreign income tax credits, in each case of or received by the Borrower and its Subsidiaries for such Measurement Period,

(ii) all non-cash items increasing Consolidated Net Income, in each case of or by the Borrower and its Subsidiaries for such Measurement Period, and

(iii) royalties, licensing fees and other payments made for the use of intellectual property paid by the Borrower and its Subsidiaries during the Measurement Period, to the extent capitalized.

“ Administrative Agent ” has the meaning specified therefor in the preamble hereto.

“ Administrative Agent Advances ” has the meaning specified therefor in Section 9.08(a).

“ Administrative Agent’s Account ” means an account at a bank designated by Administrative Agent from time to time as the account into which the Borrower shall make all payments to Administrative Agent for the benefit of itself and the Lenders under this Agreement and the other Loan Documents.

“ Affiliate ” means, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” of a Person means the power, directly or indirectly, either to (i) vote 15% or more of the Capital Stock having ordinary voting power for the election of directors of such Person or (ii) direct or cause the direction of the management and policies of such Person whether through the ownership of voting securities, by contract or otherwise. Notwithstanding anything herein to the contrary, in no event shall Administrative Agent or any Lender be considered an “Affiliate” of any Loan Party or any of their respective Affiliates.

 

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“ After Acquired Property ” means any fee interest in real property acquired by the Borrower or any of its Subsidiaries after the Effective Date with a Current Value in excess of $100,000.

“ Agreement ” means this Credit Agreement, including all amendments, modifications and supplements and any exhibits or schedules to any of the foregoing, and shall refer to the Agreement as the same may be in effect at the time such reference becomes operative.

“ Applicable Prepayment Premium ” means, with respect to any reduction of the Revolving Credit Commitments pursuant to clauses (i) or (ii) of Section 2.06(a), or the prepayment of all or any part of the Term Loans pursuant to Section 2.06(b)(ii) (or any other optional prepayment of all or any part of the Term Loans), Section 2.06(c)(iii) or Section 2.06(c)(iv):

(a) at any time on or prior to the first anniversary of the Initial Funding Date, an amount equal to 4.00% times the principal amount of such reduction or prepayment;

(b) at any time after the first anniversary of the Initial Funding Date but on or prior to the second anniversary of the Initial Funding Date, an amount equal to 1.00% times the principal amount of such reduction or prepayment; and

(c) at any time after the second anniversary of the Initial Funding Date, 0.00%.

“ Asset Acquisition ” means any purchase or other acquisition by the Borrower or any of its wholly-owned Subsidiaries of all or substantially all of the assets of any other Person.

“ Assignment and Acceptance ” means an assignment and acceptance entered into by an assigning Lender and an assignee, and accepted by Administrative Agent, in accordance with Section 11.07 hereof and substantially in the form of Exhibit A hereto or such other form acceptable to Administrative Agent.

“ Authorized Officer ” means, with respect to any Person, the chief executive officer, chief financial officer, president, or executive vice president of such Person.

“ Availability ” means, at any time, the difference between (i) the lesser of (A) the Borrowing Base, and (B) the Total Revolving Credit Commitment, and (ii) the aggregate outstanding principal amount of all Revolving Loans.

“ Bankruptcy Code ” means the United States Bankruptcy Code (11 U.S.C. § 101, et seq .), as amended, and any successor statute.

“ Blocked Account ” has the meaning specified therefor in Section 7.01(a).

“ Blocked Account Agreement ” has the meaning specified therefor in Section 7.01(a).

“ Blocked Account Bank ” has the meaning specified therefor in Section 7.01(a).

 

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“ Board ” means the Board of Governors of the Federal Reserve System of the United States.

“ Borrower ” has the meaning specified therefor in the preamble hereto.

“ Borrower Security Agreement ” means the Security Agreement dated as of the Initial Funding Date, in form and substance reasonably satisfactory to Administrative Agent, made by Borrower in favor of Administrative Agent for the benefit of itself and the Lenders, securing the Obligations and delivered to Administrative Agent on the Initial Funding Date, together with any amendments, supplements, restatements or modifications thereto.

“ Borrowing Base ” means, as of any date of determination, the sum of (i) 85% of the Net Amount of Eligible Accounts Receivable at such time, less (ii) the amount of any Dilution Reserve, less (iii) the aggregate amount, if any, of all trade payables of the Borrower and its Subsidiaries aged for more than the lesser of (x) 60 days after the due date of such payables or (y) 90 days after the invoice date of such payables, less (iv) such reserves as Administrative Agent may deem appropriate in the exercise of its business judgment.

“ Borrowing Base Certificate ” means a certificate signed by an Authorized Officer of the Borrower and setting forth the calculation of the Borrowing Base in compliance with Section 6.01(a)(vi), substantially in the form of Exhibit B.

“ Business Day ” means any day that is not a Saturday, Sunday, or other day on which banks are authorized or required to close in the State of New York.

“ Capital Expenditures ” means, with respect to any Person for any period, the aggregate of all expenditures by such Person and its Subsidiaries during such period that in accordance with GAAP are or should be included in “property, plant and equipment” or in a similar fixed asset account on its balance sheet, whether such expenditures are paid in cash or financed and including all Capitalized Lease Obligations paid or payable during such period, but excluding royalties and licensing fees paid by such Person and its Subsidiaries.

“ Capital Stock ” means (i) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, and (ii) with respect to any Person that is not a corporation, any and all partnership, membership, member’s or other equity interests of such Person.

“ Capitalized Lease ” means, with respect to any Person, any lease of real or personal property by such Person as lessee which is (i) required under GAAP to be capitalized on the balance sheet of such Person or (ii) a transaction of a type commonly known as a “synthetic lease” ( i.e. , a lease transaction that is treated as an operating lease for accounting purposes but with respect to which payments of rent are intended to be treated as payments of principal and interest on a loan for Federal income tax purposes).

“ Capitalized Lease Obligations ” means, with respect to any Person, obligations of such Person and its Subsidiaries under Capitalized Leases, and, for purposes hereof, the amount of any such obligation shall be the capitalized amount thereof determined in accordance with GAAP or in the case of a “synthetic lease” determined as if such obligation were required to be capitalized in accordance with GAAP.

 

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“ Cash and Cash Equivalents ” means all cash, deposit or securities account balances, certificates of deposit or other financial instruments properly classified as cash or cash equivalents under GAAP.

“ CFC ” means a controlled foreign corporation (as that term is defined in the IRC).

“ Change in Law ” has the meaning specified therefor in Section 3.05(a).

“ Change of Control ” means each occurrence of any of the following:

(i) the acquisition, directly or indirectly, by any person or group (within the meaning of Section 13(d)(3) of the Exchange Act), of beneficial ownership of more than 50% of the aggregate outstanding voting power of the Capital Stock of the Borrower;

(ii) the Borrower ceases to own and control, directly or indirectly, 100% of the shares of the Capital Stock of Borrower’s Subsidiaries, unless otherwise permitted hereunder;

(iii) at any time that the majority of the members of the board of directors of the Borrower do not constitute Continuing Directors; or

(iv) (A) the Borrower consolidates with or merges into another entity or conveys, transfers or leases all or substantially all of its property and assets to any Person, or (B) any entity consolidates with or merges into the Borrower, which in either event (A) or (B) is pursuant to a transaction in which the outstanding voting Capital Stock of the Borrower is reclassified or changed into or exchanged for cash, securities or other property.

“ Code ” means the New York Uniform Commercial Code, as in effect from time to time; provided , however , that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, priority, or remedies with respect to Administrative Agent’s Liens on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of New York, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies.

“ Collateral ” means all of the property and assets and all interests therein and proceeds thereof now owned or hereafter acquired by any Person upon which a Lien is granted or purported to be granted by such Person as security for all or any part of the Obligations.

“ Commitment ” means a Revolving Credit Commitment or a Term Commitment, as the context may require.

“ Common Stock and Warrant Purchase Agreement ” means the Common Stock and Warrant Purchase Agreement dated as of the Initial Funding Date, in substantially the same form as attached hereto as Exhibit F, together with any amendments, supplements, restatements or modifications thereto.

 

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“ Consolidated Interest Charges ” means, for any Measurement Period, the sum of cash paid or payable for (a) all interest, premium payments, debt discount, fees, charges and related expenses in connection with (i) borrowed money (including capitalized interest) and (ii) in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP, (b) all interest paid or payable with respect to discontinued operations and (c) the portion of rent expense under Capitalized Leases that is treated as interest in accordance with GAAP, in each case, of or by Borrower and its Subsidiaries on a consolidated basis.

“ Consolidated Net Income ” means, for any Measurement Period, the net income (or loss) of the Borrower and its Subsidiaries on a consolidated basis for that period; provided that Consolidated Net Income shall exclude (a) extraordinary gains and extraordinary losses, (b) any income (or loss) of any Person if such Person is not a Subsidiary, except that the Borrower’s equity in the net income of any such Person shall be included in Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to Borrower or a Subsidiary as a dividend or other distribution (and in the case of a dividend or other distribution to a Subsidiary, such Subsidiary is not precluded from further distributing such amount to Borrower), (c) restructuring charges, and (d) interest that is paid-in-kind.

“ Consolidated Tangible Net Worth ” means, as of any date of determination, for the Borrower and its Subsidiaries on a consolidated basis, Shareholders’ Equity of the Borrower and its Subsidiaries on that date minus the Intangible Assets of the Borrower and its Subsidiaries on that date.

“ Contingent Obligation ” means, with respect 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 (i) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of a primary obligor, (ii) the obligation to make take-or-pay or similar payments, if required, regardless of nonperformance by any other party or parties to an agreement, (iii) any obligation of such Person, whether or not contingent, (A) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (B) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (C) to purchase property, assets, 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 (D) 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 any product warranties extended 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 with respect to which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such Person may

 

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be liable pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability with respect thereto (assuming such Person is required to perform thereunder), as determined by such Person in good faith.

“ Continuing Director ” means (a) any member of the board of directors of the Borrower who was a director (or comparable manager) of the Borrower on the Effective Date, and (b) any individual who becomes a member of the board of the directors of the Borrower after the Effective Date if such individual was appointed or nominated for election to the board of the directors of the Borrower by a majority of the Continuing Directors then in office, but excluding any such individual originally proposed for election in opposition to the board of directors in office at the Effective Date in an actual or threatened election contest relating to the election of the directors (or comparable managers) of the Borrower and whose initial assumption of office resulted from such contest or the settlement thereof.

“ Current Value ” has the meaning specified therefor in Section 6.01(n).

“ Default ” means an event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default.

“ Dilution ” means, as of any date of determination, a percentage, based upon the experience of the immediately prior 90 days, that is the result of dividing the Dollar amount of (a) bad debt write-downs, discounts, advertising allowances, credits, or other dilutive items with respect to the Loan Parties’ Account Receivables during such period, by (b) the Loan Parties’ billings with respect to Account Receivables during such period (excluding extraordinary items).

“ Dilution Reserve ” means, as of any date of determination, an amount sufficient to reduce the advance rate against Eligible Accounts Receivable by one percentage point for each percentage point by which Dilution is in excess of 5%.

“ Disclosure Schedule ” shall mean the Disclosure Schedule dated the Effective Date and delivered by the Borrower to the Administrative Agent contemporaneously with the execution and delivery of this Agreement, and which schedule shall be updated on or before the Initial Funding Date pursuant to Section 4.02(d)(xxiii), which schedule and which update to such schedule must be in form and substance satisfactory to the Administrative Agent in its sole and absolute discretion.

“ Disposition ” means any transaction, or series of related transactions, pursuant to which any Person or any of its Subsidiaries sells, assigns, transfers or otherwise disposes of any property or assets (whether now owned or hereafter acquired) to any other Person, in each case, whether or not the consideration therefor consists of cash, securities or other assets owned by the acquiring Person. For the avoidance of doubt, the sale and/or licensing of the assets described in the IGT Asset Purchase Agreement shall constitute a “Disposition” and the sale or issuance of Capital Stock of the Borrower or its Subsidiaries shall not constitute a “Disposition.”

“ Dollar ,” “ Dollars ” and the symbol “ $ ” each means lawful money of the United States of America.

 

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“ Domestic Subsidiary ” means any Subsidiary of any Person that is not a CFC.

“ Effective Date ” means the date on which all of the conditions precedent set forth in Section 4.01 are first satisfied or waived.

“ Eligible Accounts Receivable ” means the Accounts Receivable of any Loan Party which are, and at all times continue to be, acceptable to Administrative Agent in the exercise of its reasonable business judgment. Without limitation on the discretion of the Administrative Agent, an Account Receivable may, in the sole and absolute discretion of Administrative Agent, be deemed to be eligible if:

(i) delivery of the merchandise or the rendition of the services has been completed with respect to such Account Receivable and the Account Receivable has not resulted from a transaction wherein goods are placed on consignment or are sold pursuant to a guaranteed sale, a sale or return, a sale on approval, a bill and hold, or any other terms by reason of which the payment by the Account Debtor may be conditional;

(ii) no return, rejection, repossession or dispute has occurred with respect to such Account Receivable, the Account Debtor has not asserted any setoff, defense or counterclaim with respect to such Account Receivable, and there has not occurred any extension of the time for payment with respect to such Account Receivable without the consent of Administrative Agent, provided that, in the case of any dispute, setoff, defense or counterclaim with respect to an Account Receivable, the portion of such Account Receivable not subject to such dispute, setoff, defense or counterclaim will not be ineligible solely by reason of this clause (ii);

(iii) such Account Receivable is lawfully owned by a Loan Party, subject to a perfected Lien in favor of Administrative Agent for the benefit of itself and the Lenders and free and clear of any other Lien (other than Liens securing the IGT Subordinated Debt and Liens permitted pursuant to clauses (ii) or (x) of the definition of Permitted Liens) and otherwise continues to be in full conformity with all representations and warranties made by such Loan Party to Administrative Agent and the Lenders with respect thereto in the Loan Documents; (iv) such Account Receivable is unconditionally payable in Dollars (or in the case of Eligible Canadian Accounts, Canadian dollars) within 30 days from the invoice date and is not evidenced by a promissory note, chattel paper or any other instrument or other document; provided, however that in the case of contract receivable customers, such Account Receivables may be due in installments over a period not to exceed one year;

(iv) (x) no more than 60 days have elapsed from the invoice due date or installment payment due date and (y) no more than 120 days have elapsed from the invoice date with respect to such Account Receivable, except with respect to contract receivable customers;

(v) such Account Receivable is not due from an Affiliate of a Loan Party or any of its Subsidiaries;

(vi) such Account Receivable does not constitute an obligation of the United States, Canada or any other Governmental Authority (unless all steps required by Administrative Agent in connection therewith, including notice to the United States Government under the Federal Assignment of Claims Act or any action under any Canadian or state statute comparable to the

 

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Federal Assignment of Claims Act, have been duly taken in a manner satisfactory to Administrative Agent), including without limitation the obligation of a Native American tribal government or an agency or instrumentality thereof, to the extent that the aggregate Accounts Receivable owed to the Loan Parties by Native American tribal governments, their agencies and instrumentalities, are in excess of $750,000;

(vii) the Account Debtor (or the applicable office of the Account Debtor) with respect to such Account Receivable is located in the continental United States or if such Account Debtor (or the applicable office of such Account Debtor) is not located in the continental United States, (A) such Account Receivable is an Eligible Canadian Account or (B) such Account Receivable is supported by an irrevocable letter of credit satisfactory to Administrative Agent that has been delivered to Administrative Agent and is directly drawable by Administrative Agent, or is covered by credit insurance satisfactory to Administrative Agent or (C) such Account Receivable is an Eligible Other Foreign Account provided that the aggregate amount of Eligible Other Foreign Accounts eligible under this clause shall not at any time exceed $750,000;

(viii) the Account Debtor with respect to such Account Receivable is not a vendor to, supplier to, licensor to or creditor of a Loan Party; provided, however, that in the event that an Account Debtor is a vendor to, supplier to, licensor to or creditor of a Loan Party such Account Receivable will be eligible under this clause if the Account Debtor has executed a non-offset letter reasonably satisfactory to Administrative Agent; provided further, however, that if such an Account Debtor has not executed a non-offset agreement, Administrative Agent, in its discretion, may include as eligible the net amount due from such Account Debtor to such Loan Party;

(ix) not more than 50% of the aggregate amount of all Accounts Receivable of the Account Debtor with respect to such Account Receivable have (A) except for contracts receivable customers, remained unpaid more than 60 days past the invoice due date or more than 120 days past the invoice date, and (B) in the case of contracts receivable customers, remained unpaid for more than 60 days past the installment payment due date;

(x) the Account Debtor with respect to such Account Receivable (A) has not filed a petition for bankruptcy or any other relief under the Bankruptcy Code or any other law relating to bankruptcy, insolvency, reorganization or relief of debtors, made an assignment for the benefit of creditors, had filed against it any petition or other application for relief under the Bankruptcy Code or any such other law, (B) has not failed, suspended business operations, or called a meeting of its creditors for the purpose of obtaining any financial concession or accommodation, (C) has not had or suffered to be appointed a receiver or a trustee for all or a significant portion of its assets or affairs or (D) in the case of an Account Debtor who is an individual, is not an employee of a Loan Party or any of its Affiliates and has not died or been declared incompetent;

(xi) Administrative Agent is, and continues to be, satisfied with the credit standing of the Account Debtor in relation to the amount of credit extended and Administrative Agent believes, in its discretion, that the prospect of collection of such Account Receivable is not impaired for any reason;

 

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(xii) the Account Receivable does not represent the right to receive progress payments or other advance billings that are due prior to the completion of performance by a Loan Party of the subject contract for goods or services; and

(xiii) with respect to any Accounts Receivable acquired by any Loan Party through a Permitted Acquisition, the Administrative Agent has had a reasonable opportunity to audit such Accounts Receivable and the Administrative Agent, in the exercise of its reasonable business judgment, has found such Accounts Receivable to be acceptable.

“ Eligible Canadian Account ” means an Account Receivable as to which such Account Receivable does not qualify as an Eligible Account Receivable solely because (i) the Account Debtor with respect to such Account Receivable maintains its chief executive office in Canada (other than the Maritime provinces) rather than in the United States or is organized under the laws of Canada or a political subdivision thereof (other than the Maritime provinces) rather than under the laws of the United States or any state thereof, and (ii) the Account is payable in Canadian dollars; provided however, that (x) such Account Receivable must be billed from and collected in the United States and (y) if such Account Receivable is payable in Canadian dollars, Administrative Agent may establish reserves with respect to exchange rate risks.

“ Eligible Other Foreign Account ” means an Account Receivable as to which such Account Receivable does not qualify as an Eligible Account Receivable solely because the Account Debtor with respect to such Account Receivable maintains its chief executive office in Latin America, the Caribbean Islands (other than Cuba), or Puerto Rico rather than in the United States or is organized under the laws of a country located in Latin America, the Caribbean Islands (other than Cuba), or Puerto Rico rather than under the laws of the United States or any state thereof; provided however , that (x) such Account Receivable must be billed from and collected in the United States and (y) the governing law of the transaction giving rise to such Account Receivable is the law of the United States or any state thereof.

“ Employee Plan ” means an employee benefit plan (other than a Multiemployer Plan) covered by Title IV of ERISA and maintained (or that was maintained at any time during the six (6) calendar years preceding the date of any borrowing hereunder) for employees of any Loan Party, any Subsidiary of any Loan Party, or any of their respective ERISA Affiliates.

“ EndX ” means EndX Inc. (USA), a Nevada corporation.

“ Environmental Actions ” means any complaint, summons, citation, notice, directive, order, claim, litigation, investigation, judicial or administrative proceeding, judgment, letter or other communication from any Governmental Authority involving violations of Environmental Laws or Releases of Hazardous Materials (i) from any assets, properties or businesses of any Loan Party or any of its Affiliates or any predecessor in interest; (ii) from adjoining properties or businesses; or (iii) onto any facilities which received Hazardous Materials generated by any Loan Party or any of its Affiliates or any predecessor in interest.

“ Environmental Laws ” means the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601, et seq .), the Hazardous Materials Transportation Act (49 U.S.C. § 1801, et seq .), the Resource Conservation and Recovery Act

 

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(42 U.S.C. § 6901, et seq .), the Federal Clean Water Act (33 U.S.C. § 1251, et seq .), the Clean Air Act (42 U.S.C. § 7401, et seq .), the Toxic Substances Control Act (15 U.S.C. § 2601, et seq .) and the Occupational Safety and Health Act (29 U.S.C. § 651, et seq .), as such laws may be amended or otherwise modified from time to time, and any other present or future federal, state, local or foreign statute, ordinance, rule, regulation, order, judgment, decree, permit, license or other binding determination of any Governmental Authority imposing liability or establishing standards of conduct for protection of the environment or other government restrictions relating to the protection of the environment or the release, emission, deposit, discharge, leaching, migration or spill of any Hazardous Materials into the environment.

“ Environmental Liabilities and Costs ” means all liabilities, monetary obligations, Remedial Actions, losses, damages, punitive damages, consequential damages, treble damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts and consultants and costs of investigations and feasibility studies), fines, penalties, sanctions and interest incurred as a result of any claim or demand by any Governmental Authority or any third party, and which relate to the liability or potential liability of any Loan Party or any of its Affiliates with respect to any environmental condition or a Release of Hazardous Materials from or onto (i) any property currently or formerly owned by any Loan Party or any of its Affiliates or (ii) any property which received Hazardous Materials generated by any Loan Party or any of its Affiliates.

“ Environmental Lien ” means any Lien in favor of any Governmental Authority for Environmental Liabilities and Costs.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, and regulations thereunder, in each case, as in effect from time to time. References to sections of ERISA shall be construed also to refer to any successor sections.

“ ERISA Affiliate ” means, with respect to any Person, any trade or business (whether or not incorporated) which is a member of a group of which such Person is a member and which would be deemed to be a “controlled group” within the meaning of Sections 414(b), (c), (m) and (o) of the IRC.

“ Event of Default ” means any of the events set forth in Section 8.01.

“ Excess Cash Flow ” means, for any Fiscal Year of the Borrower, the excess (if any) of (a) Adjusted Consolidated EBITDA for such Fiscal Year over (b) the sum (for such Fiscal Year) of (i) all interest, premium payments, debt discount, fees, charges and related expenses in connection with borrowed money (including capitalized interest) or in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP, actually paid in cash by the Borrower and its Subsidiaries, (ii) scheduled principal repayments, to the extent actually made, of Term Loans pursuant to Section 2.04(b), (iii) all income taxes actually paid in cash by the Borrower and its Subsidiaries, and (iv) non-financed Capital Expenditures actually made by the Borrower and its Subsidiaries in such fiscal year.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

 

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“ Existing Foreign Subsidiary ” has the meaning set forth in Section 4.02(d)(xxiv) of this Agreement.

“ Extraordinary Receipts ” means any cash received by the Borrower or any of its Subsidiaries not in the ordinary course of business (and not consisting of proceeds of Dispositions, Indebtedness or the sale or issuance of Capital Stock of the Borrower or its Subsidiaries), including (i) foreign, United States, state or local tax refunds, (ii) pension plan reversions, (iii) proceeds of insurance (excluding any portion of such proceeds that is for the reimbursement of the Borrower’s and its Subsidiaries’ out-of-pocket litigation expenses), (iv) judgments, proceeds of settlements or other consideration of any kind in connection with any cause of action (but only to the extent such proceeds or other consideration exceeds the amount of the losses suffered by the Borrower or its Subsidiaries that are subject of such judgment, settlement or cause of action), (v) condemnation awards (and payments in lieu thereof), (vi) indemnity payments (excluding any portion of such payments that is for the reimbursement of the Borrower’s and its Subsidiaries’ out-of-pocket litigation expenses), and (vii) any purchase price adjustment received in connection with any purchase agreement and any amounts received from escrow arrangements in connection with any purchase agreement.

“ Federal Funds Rate ” means, for any period, a fluctuating interest rate per annum equal to, for each day during such period, 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 on the next succeeding 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 Administrative Agent from three Federal funds brokers of recognized standing selected by it.

“ Fee Letter ” means the fee letter agreement dated as of the Effective Date among the Borrower and the Administrative Agent.

“ Final Maturity Date ” means the later of the Revolving Maturity Date or the Term Maturity Date.

“ Financial Statements ” means the audited consolidated balance sheet of the Borrower and its Subsidiaries for the Fiscal Year ended December 31, 2007, and the related consolidated statement of operations, shareholders’ equity and cash flows for the Fiscal Year then ended.

“ Fiscal Year ” means the fiscal year of the Borrower and its Subsidiaries ending on December 31st of each year.

“ GAAP ” means generally accepted accounting principles in effect from time to time in the United States, applied on a consistent basis, provided that for the purpose of Section 6.03 hereof and the definitions used therein, “GAAP” shall mean generally accepted accounting principles in effect on the Effective Date and consistent with those used in the preparation of the Financial Statements, provided, further, that if there occurs after the date of this Agreement any change in GAAP that affects in any respect the calculation of any covenant contained in Section 6.03 hereof, Administrative Agent and the Borrower shall negotiate in good faith amendments to the provisions of this Agreement that relate to the calculation of such covenant

 

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with the intent of having the respective positions of the Lenders and the Borrower after such change in GAAP conform as nearly as possible to their respective positions as of the date of this Agreement and, until any such amendments have been agreed upon, the covenants in Section 6.03 hereof shall be calculated as if no such change in GAAP has occurred.

“ Gaming Authorities ” means the United States federal government, any foreign government, tribal government or any state, county, municipality or other political subdivision or any agency or other Governmental Authority thereof that now or hereafter has jurisdiction over all or any portion of the gaming activities of the Loan Parties or any of their Affiliates, including, without limitation, the Nevada Gaming Authorities and the Mississippi Gaming Authorities.

“ Gaming Laws ” means any law, statute, ordinance, code, regulation, constitutional provision, rule, order, directive or other enforcement requirement now or hereafter in existence of any Gaming Authority.

“ Gaming License ” means any finding of suitability, registration, license, franchise qualification or other approval or authorization required of the Borrower, the Guarantors or any of their Affiliates on the date hereof or hereafter required to own, lease, operate or otherwise conduct the gaming business of the Loan Parties or any of their Affiliates, including all licenses granted under any Gaming Laws.

“ Gaming Subsidiary ” shall mean each of PGIC NV, a Nevada corporation and MGC, Inc., a Nevada corporation.

“ Governmental Authority ” means any nation or government, any Federal, state, city, town, municipality, county, local or other political subdivision thereof or thereto and any department, commission, board, bureau, instrumentality, agency or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“ Guaranteed Obligations ” has the meaning specified therefor in Section 10.01.

“ Guarantor ” and “ Guarantors ” have the meanings specified therefor in the preamble to this Agreement.

“ Guarantor Security Agreement ” means the Security Agreement to be dated as of the Initial Funding Date, in form and substance reasonably satisfactory to Administrative Agent, made by Guarantors in favor of Administrative Agent for the benefit of itself and the Lenders, securing the Guaranteed Obligations and delivered to Administrative Agent on the Initial Funding Date, together with any amendments, supplements, restatements or modifications thereto.

“ Guaranty ” means (i) the guaranty of each Guarantor party hereto contained in Article X hereof, and (ii) each other guaranty made by any other Guarantor in favor of Administrative Agent for the benefit of itself and the Lenders pursuant to the requirements of Section 6.01(b) or otherwise.

 

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“ Hazardous Materials ” means (a) any element, compound or chemical that is defined, listed or otherwise classified as a contaminant, pollutant, toxic pollutant, toxic or hazardous substance, extremely hazardous substance or chemical, hazardous waste, special waste, or solid waste under Environmental Laws or that is likely to cause immediately, or at some future time, harm to or have an adverse effect on, the environment or risk to human health or safety, including any pollutant, contaminant, waste, hazardous waste, toxic substance or dangerous good which is defined or identified in any Environmental Law and which is present in the environment in such quantity or state that it contravenes any Environmental Law; (b) petroleum and its refined products; (c) polychlorinated biphenyls; (d) any substance exhibiting a hazardous waste characteristic, including corrosivity, ignitability, toxicity or reactivity as well as any radioactive or explosive materials; and (e) any raw materials, building components (including asbestos-containing materials) and manufactured products containing hazardous substances listed or classified as such under Environmental Laws.

“ Hedging Agreement ” means any interest rate, foreign currency, commodity or equity swap, collar, cap, floor or forward rate agreement, or other agreement or arrangement designed to protect against fluctuations in interest rates or currency, commodity or equity values (including any option with respect to any of the foregoing and any combination of the foregoing agreements or arrangements), and any confirmation executed in connection with any such agreement or arrangement.

“ Highest Lawful Rate ” means, with respect to Administrative Agent or any Lender, the maximum interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the Obligations under laws applicable to Administrative Agent or such Lender which are currently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum non-usurious interest rate than applicable laws now allow.

“ IGT ” means, collectively, International Game Technology, a Nevada corporation, its successors and permitted assigns.

“ IGT Asset Purchase Agreement ” means that certain Asset Purchase and License Agreement between Borrower and IGT, a Nevada corporation, delivered to the Administrative Agent pursuant to Section 4.02 of this Agreement, as the same exists on the Initial Funding Date.

“ IGT Note Purchase Agreement ” means that certain Note and Warrant Purchase Agreement dated as of the date hereof among the Loan Parties and IGT, as in effect on the Effective Date, and including only those amendments, modifications and supplements thereto that are in compliance with the Subordination Agreement.

“ IGT Notes ” means the indebtedness evidenced by the Senior Secured Convertible Notes dated as of the Effective Date in the aggregate principal amount of $15,000,000, made by Borrower in favor of IGT, and including only those amendments, modifications and supplements thereto that are in compliance with the Subordination Agreement.

“ IGT Subordinated Debt ” means the indebtedness evidenced by the IGT Notes.

 

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“ IGT Subordinated Debt Documents ” means the IGT Note Purchase Agreement, the IGT Notes, any guaranty, security agreement or mortgage executed by the Borrower or any of its Subsidiaries in connection with the IGT Note Purchase Agreement, the registration rights agreement executed in connection with the IGT Note Purchase Agreement, the source code escrow agreement, the blocked account agreements, the control agreements and any other agreement, instrument and other document executed and delivered pursuant to the IGT Note Purchase Agreement or otherwise evidencing or securing the IGT Subordinated Debt or compensating IGT or any holder of the IGT Subordinated Debt in any way.

“ IGT Subordination Agreement ” means the Subordination Agreement dated as of the Initial Funding Date between Administrative Agent and IGT, and acknowledged by the Borrower, in substantially the same form as attached hereto as Exhibit G.

“ Inactive Subsidiary ” means each of Mikohn Holdings and EndX.

“ Indebtedness ” means, with respect to any Person, without duplication, (i) all indebtedness of such Person for borrowed money; (ii) all obligations of such Person for the deferred purchase price of property or services (other than trade payables or other accounts payable incurred in the ordinary course of such Person’s business and not outstanding for more than 150 days after the date such payable was created, or, if outstanding for more than 150 days after the date such payable was created, not more than $100,000 in the aggregate); (iii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments or upon which interest payments are customarily made; (iv) all reimbursement, payment or other obligations and liabilities of such Person created or arising under any conditional sales or other title retention agreement with respect to property used or acquired by such Person, even though the rights and remedies of the lessor, seller or lender thereunder may be limited to repossession or sale of such property; (v) all Capitalized Lease Obligations of such Person; (vi) all obligations and liabilities, contingent or otherwise, of such Person, in respect of letters of credit, acceptances and similar facilities; (vii) all obligations and liabilities, calculated on a basis reasonably satisfactory to Administrative Agent and in accordance with accepted practice, of such Person under Hedging Agreements; (viii) all Contingent Obligations; (ix) liabilities incurred under Title IV of ERISA with respect to any plan (other than a Multiemployer Plan) covered by Title IV of ERISA and maintained for employees of such Person or any of its ERISA Affiliates; (x) withdrawal liability incurred under ERISA by such Person or any of its ERISA Affiliates with respect to any Multiemployer Plan; (xi) all monetary obligations under any receivables factoring, receivable sales or similar transactions and all monetary obligations under any synthetic lease, tax ownership/operating lease, off-balance sheet financing or similar financing; and (xii) all obligations referred to in clauses (i) through (xi) of this definition of another Person secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) a Lien upon property owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness. The Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or joint venturer.

“ Indemnified Matters ” has the meaning specified therefor in Section 11.15.

“ Indemnitees ” has the meaning specified therefor in Section 11.15.

 

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“ Indenture ” means the Indenture, dated as of August 22, 2001, among Borrower, the Subsidiaries of Borrower signatory thereto, and the Indenture Trustee.

“ Indenture Documents ” means the Indenture, the Senior Secured Notes, and the other agreements and documents executed or delivered in connection therewith, as amended or modified in accordance with the terms hereof and thereof.

“ Indenture Trustee ” means U.S. Bank N.A. (f/k/a Firstar Bank, N.A.), as trustee.

“ Initial Funding Date ” means the date on which all of the conditions precedent set forth in Section 4.02 are first satisfied or waived.

“ Insolvency Proceeding ” means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, or extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.

“ Intangible Assets ” means assets that are considered to be intangible assets under GAAP, including customer lists, goodwill, computer software, copyrights, trade names, trademarks, patents, franchises, licenses, unamortized deferred charges, unamortized debt discount and capitalized research and development costs.

“ Inventory ” means all of each of the Loan Parties’ now owned or hereafter acquired right, title, and interest with respect to inventory as defined in the Code.

“ IRC ” means the Internal Revenue Code of 1986, as amended (or any successor statute thereto) and the regulations thereunder.

“ Lease ” means any lease of real property to which any Loan Party or any of its Subsidiaries is a party as lessor or lessee.

“ Lender ” and “ Lenders ” have the meanings specified therefor in the preamble hereto.

“ Lien ” means any mortgage, deed of trust, pledge, lien (statutory or otherwise), security interest, charge or other encumbrance or security or preferential arrangement of any nature, including any conditional sale or title retention arrangement, any Capitalized Lease and any assignment, deposit arrangement or financing lease intended as, or having the effect of, security.

“ Liquidity ” means, at any date of determination, Availability plus Qualified Cash.

“ Loan ” means an extension of credit by a Lender in the form of a Revolving Loan or Term Loan.

“ Loan Account ” means an account maintained hereunder by Administrative Agent on its books of account at the Payment Office, and with respect to the Borrower, in which the Borrower will be charged with all Loans made to, and all other Obligations incurred by, the Borrower.

 

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“ Loan Document ” means this Agreement, the IGT Subordination Agreement, any Guaranty, the Borrower Security Agreement, the Guarantor Security Agreement, any Mortgage, the Warrant, the Registration Rights Agreement, the Common Stock and Warrant Purchase Agreement, the Fee Letter, the Source Code Escrow Agreement, the Blocked Account Agreements, the control agreements with respect to the Loan Parties’ deposit and investment accounts, and any other agreement, instrument, and other document executed and delivered pursuant hereto or thereto or otherwise evidencing or securing the Loans or any other Obligation.

“ Loan Party ” means the Borrower or any Guarantor.

“ Lockbox Agreement ” has the meaning specified therefor in Section 7.01(a).

“ Lockbox Processor ” has the meaning specified therefor in Section 7.01(a).

“ Material Adverse Effect ” means any change or event that has had or could reasonably be expected to have a material adverse effect on (i) the operations, business, assets, properties, or financial condition of (A) any Loan Party (other than the Inactive Subsidiaries), (B) any Subsidiary of any Loan Party that holds a Gaming License or otherwise has assets, revenues, operations or businesses that are material to any Loan Party, (C) the Loan Parties taken as a whole or (D) the Loan Parties and their Subsidiaries taken as a whole, (ii) the ability of any Loan Party to perform any of its obligations under any Loan Document to which it is a party, (iii) the legality, validity or enforceability of this Agreement or any other Loan Document, or (iv) the rights and remedies of Administrative Agent or any Lender under any Loan Document.

“ Material Contract ” means, with respect to the Loan Parties and or any of their Subsidiaries, each contract or agreement filed with the SEC as an exhibit to the Borrower’s periodic reports under the Exchange Act or required to be so filed pursuant to the rules and regulations promulgated under the Exchange Act or the Securities Act or that is otherwise material to operations or business of the Borrower or any of its Subsidiaries.

“ Measurement Period ” means, (a) as of September 30, 2008, the three month period then ended, (b) as of December 31, 2008, the six month period then ended, (C) as of March 31, 2009, the nine month period then ended, and (d) as of June 30, 2009 and that last day of each subsequent fiscal quarter, the most recently completed four fiscal quarters of the Borrower.

“ Mikohn Holdings ” means Mikohn Holdings, Inc., a Nevada corporation.

“ Mississippi Gaming Authorities ” means the Mississippi Gaming Commission and other applicable state, county, city and municipal authorities within the State of Mississippi possessing regulatory, licensing or permit authority over the ownership or operation of gaming activities in the State of Mississippi (or any such county, city or municipality therein).

“ Moody’s ” means Moody’s Investors Service, Inc. and any successor thereto.

“ Mortgage ” means a mortgage, deed of trust or deed to secure debt, in form and substance satisfactory to Administrative Agent, made by a Loan Party in favor of Administrative Agent for the benefit of itself and the Lenders, securing the Obligations and delivered to Administrative Agent pursuant to the provisions hereof or otherwise.

 

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“ Multiemployer Plan ” means a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA to which any Loan Party or any of its Subsidiaries or any of their respective ERISA Affiliates has contributed to, or has been obligated to contribute, at any time during the preceding six (6) years.

“ Net Amount of Eligible Accounts Receivable ” means the aggregate unpaid invoice amount of Eligible Accounts Receivable less, without duplication, sales, excise or similar taxes, returns, discounts, chargebacks, claims, advance payments, credits and allowances of any nature at any time issued, owing, granted, outstanding, available or claimed with respect to such Eligible Accounts Receivable.

“ Net Cash Proceeds ” means, (i) with respect to any Disposition by any Person or any of its Subsidiaries, the amount of cash received (directly or indirectly) from time to time (whether as initial consideration or through the payment or disposition of deferred consideration) by or on behalf of such Person or such Subsidiary, in connection therewith after deducting therefrom only (A) the amount of any Indebtedness secured by any Permitted Lien on any asset (other than Indebtedness assumed by the purchaser of such asset) which is required to be, and is, repaid in connection with such Disposition (other than Indebtedness under this Agreement), (B) reasonable expenses related thereto incurred by such Person or such Subsidiary in connection therewith (including reasonable and out-of-pocket legal, accounting and investment banking fees, and sales commissions), (C) transfer taxes paid to any taxing authorities by such Person or such Subsidiary in connection therewith, (D) net income taxes to be paid in connection with such Disposition (after taking into account any tax credits or deductions and any tax sharing arrangements), and (E) appropriate amounts that must be set aside as a reserve in accordance with GAAP against any liabilities associated with such Disposition; provided that upon release of such reserve, such amounts shall automatically and immediately become Net Cash Proceeds, and (ii) with respect to the issuance or incurrence of any Indebtedness by any Person or any of its Subsidiaries, or the sale or issuance by any Person or any of its Subsidiaries of any shares of its Capital Stock, the aggregate amount of cash received (directly or indirectly) from time to time (whether as initial consideration or through the payment or disposition of deferred consideration) by or on behalf of such Person or such Subsidiary in connection therewith, after deducting therefrom only (A) reasonable expenses related thereto incurred by such Person or such Subsidiary in connection therewith (including reasonable and out-of-pocket legal, accounting and investment banking fees, and sales commissions), (B) transfer taxes paid by such Person or such Subsidiary in connection therewith, (C) net income taxes to be paid in connection therewith (after taking into account any tax credits or deductions and any tax sharing arrangements), and (D) appropriate amounts that must be set aside as a reserve in accordance with GAAP against any liabilities associated with such issuance or incurrence; provided that upon release of such reserve, such amounts shall automatically and immediately become Net Cash Proceeds; in each case of clause (i) and (ii) to the extent, but only to the extent, that the amounts so deducted are (x) actually paid to a Person that, except in the case of reasonable out-of-pocket expenses, is not an Affiliate of such Person or any of its Subsidiaries and (y) properly attributable to such transaction or to the asset that is the subject thereof.

“ Nevada Gaming Authorities ” means the NGC, the NGCB and applicable county, city and municipal authorities within the State of Nevada possessing regulatory, licensing or permit

 

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authority over the ownership or operation of gaming activities in the State of Nevada (or any such county, city or municipality therein).

“ NGC ” means the Nevada Gaming Commission.

“ NGCB ” means the Nevada State Gaming Control Board.

“ New Lending Office ” has the meaning specified therefor in Section 2.08(d).

“ New Subsidiary ” has the meaning specified therefor in Section 6.01(b).

“ Non-U.S. Lender ” has the meaning specified therefor in Section 2.08(d).

“ Notice of Borrowing ” has the meaning specified therefor in Section 2.03(a).

“ Obligations ” means all present and future indebtedness, obligations, and liabilities of each Loan Party to Administrative Agent and the Lenders, or any of them, under the Loan Documents, whether or not the right of payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured, unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding described in subsections (f) and (g) of Section 8.01. Without limiting the generality of the foregoing, the Obligations of each Loan Party under the Loan Documents include (a) the obligation (irrespective of whether a claim therefor is allowed in any Insolvency Proceeding) to pay principal, interest, charges, expenses, fees, attorneys’ fees and disbursements, indemnities and other amounts payable by such Person under the Loan Documents, and (b) the obligation of such Person to reimburse any amount in respect of any of the foregoing that Administrative Agent or any Lender (in its sole discretion) may elect to pay or advance on behalf of such Person. For purposes of this definition, the term “Loan Documents” shall exclude the Securities.

“ Other Taxes ” has the meaning specified therefor in Section 2.08(b).

“ Participant Register ” has the meaning specified therefor in Section 11.07(g).

“ Patriot Act ” has the meaning specified therefor in Section 11.22.

“ Payment Office ” means Administrative Agent’s office located at One Park Plaza, Suite 550, Irvine, CA 92614 or at such other office or offices of Administrative Agent as may be designated in writing from time to time by Administrative Agent to the Borrower.

“ PBGC ” means the Pension Benefit Guaranty Corporation or any successor thereto.

“ Permitted Acquisition ” means any Acquisition so long as:

(i) no Default or Event of Default shall have occurred and be continuing or would result from the consummation of the proposed Acquisition, including, without limitation, any default under any anti-dilution provision set forth in the Loan Documents;

 

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(ii) the assets being acquired, or the Person whose Capital Stock is being acquired, (A) are useful in or engaged in, as applicable, the business of the Borrower and its Subsidiaries or a business reasonably related thereto, and (B) shall be located or organized, as applicable, within the United States or Canada;

(iii) the consideration payable in connection with the proposed Acquisition shall be payable with the Capital Stock (other than Prohibited Preferred Stock) of the Borrower or proceeds of the contemporaneous sale or issuance of the Capital Stock (other than Prohibited Preferred Stock) of the Borrower, and the total consideration payable in connection with all Permitted Acquisitions (including the proposed Acquisition) does not exceed $10,000,000;

(iv) the Borrower has provided Administrative Agent with written confirmation, supported by reasonably detailed calculations, in each case which are in form and substance reasonably satisfactory to Administrative Agent, that (A) on a pro forma basis, created by adding the historical combined financial statements of the Borrower (including the combined financial statements of any other Person or assets that were the subject of a prior Permitted Acquisition during the relevant period) to the historical consolidated financial statements of the Person to be acquired (or the historical financial statements related to the assets to be acquired) pursuant to the proposed Acquisition (adjusted to eliminate expense items that would not have been incurred and include income items that would have been recognized, in each case, if the combination had been accomplished at the beginning of the relevant period; such eliminations and inclusions to be mutually agreed upon by the Borrower and Administrative Agent), the Loan Parties and their Subsidiaries would have been in compliance with the financial covenants in Section 6.03 for the 12 months ending as of the fiscal quarter of the Borrower ended immediately prior to the proposed date of consummation of such proposed Acquisition and (B) the Qualified Cash of the Loan Parties and their Subsidiaries immediately following the consummation of the proposed Acquisition shall not be less than their Qualified Cash immediately prior to the consummation of the proposed Acquisition;

(v) in the case of an Asset Acquisition, the subject assets are being acquired by the Borrower or a Domestic Subsidiary of the Borrower, and the applicable Person shall have executed and delivered or authorized, as applicable, any and all security agreements, financing statements, fixture filings, and other documentation reasonably requested by Administrative Agent in order to include the newly acquired assets within the Collateral;

(vi) in the case of a Stock Acquisition, (A) the subject Capital Stock is being acquired in such Acquisition directly by the Borrower or a Domestic Subsidiary of the Borrower, (2) the relevant Loan Party shall have executed and delivered a pledge agreement respecting the Capital Stock being acquired and shall have delivered to Administrative Agent possession of the original stock certificates respecting all of the issued and outstanding shares of Capital Stock of such acquired Person and its Subsidiaries, together with stock powers with respect thereto endorsed in blank; provided that if such Person is a CFC, the relevant Loan Party shall have delivered to

 

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Administrative Agent possession of the original stock certificates respecting all (or, 65% of the outstanding voting Capital Stock of such Person if pledging or hypothecating more than 65% of the total outstanding voting Capital Stock of such Person reasonably could be expected to result in material adverse tax consequences to any Loan Party) of the issued and outstanding shares of Capital Stock of such acquired Person, together with stock powers with respect thereto endorsed in blank, and (3) the relevant Loan Party shall have caused such acquired Person and each of its Subsidiaries to execute and deliver a joinder to either this Agreement or a Guaranty as a Guarantor in order to make such Person a party hereto or thereto, together with any and all security agreements, financing statements, fixture filings, and other documentation reasonably requested by Administrative Agent in order to cause such acquired Person and each of its Subsidiaries to be obligated with respect to the Obligations (or the Secured Obligations under, and as defined in, the Guarantor Security Agreement) and to include the assets of the acquired Person and its Subsidiaries within the Collateral; provided that none of the foregoing documents shall be required to be provided to Administrative Agent if such Person is a CFC and providing such documents reasonably could be expected to result in material adverse tax consequences to any Loan Party;

(vii) any Indebtedness or Liens assumed in connection with such Acquisition are otherwise permitted under Section 6.02(a) or 6.02(b), respectively;

(viii) such Acquisition shall be consensual and shall have been approved by the board of directors (or such other managing body) of the Person whose Capital Stock or assets are proposed to be acquired and shall not have been preceded by an unsolicited tender offer for such Capital Stock by, or proxy contest initiated by, the Borrower or any of its Subsidiaries; and

(ix) the Borrower shall have delivered (A) projections for the Person whose Capital Stock or assets are proposed to be acquired, (B) updated pro forma Projections for the Borrower and its Subsidiaries evidencing compliance on a pro forma basis with Section 6.03 for the 12 calendar months following the date of such Acquisition (on a quarter-by-quarter basis), in form and content reasonably acceptable to Administrative Agent and (C) an update to the Disclosure Schedule and to the schedules of each of the other Loan Documents solely with respect to such Acquisition (to the extent not prohibited by the terms hereof and thereof), as applicable; provided , that (x) in no event may the Disclosure Schedule or any other schedule to the other Loan Documents be updated in a manner that would reflect or evidence a Default or Event of Default and (y) any determination of Adjusted Consolidated EBITDA of the Borrower and its Subsidiaries for such 12 calendar month period shall include only such post-acquisition cost saving adjustments which are mutually agreed upon by the Borrower and the Administrative Agent.

“ Permitted Dispositions ” means:

(i) sales or other dispositions of Inventory to buyers in the ordinary course of business;

 

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(ii) sales or other dispositions of obsolete, excess or worn-out equipment in the ordinary course of business; provided that the Net Cash Proceeds of such Dispositions shall not exceed $100,000 in the aggregate in any twelve-month period;

(iii) sales or other dispositions of other property or assets (other than Capital Stock of the Borrower or its Subsidiaries) for cash in an aggregate amount not less than the fair market value of such property or assets, provided that the Net Cash Proceeds of such Dispositions shall not exceed $500,000 in the aggregate in any twelve-month period;

(iv) the use or transfer of money or Cash Equivalents by the Borrower and its Subsidiaries in a manner that is not prohibited by the terms of this Agreement or the other Loan Documents;

(v) the licensing by the Borrower and its Subsidiaries, on a non-exclusive basis, of patents, trademarks, copyrights and other intellectual property rights in the ordinary course of business for a license fee or other consideration that is not less than fair market value;

(vi) the granting of leases or subleases to other Persons not materially interfering with the conduct of business of any Loan Party or its Subsidiaries;

(vii) the sale or other disposition of Accounts Receivable in connection with the collection or compromise thereof in the ordinary course of business and in a manner not inconsistent with the provisions of this Agreement (excluding any securitization or factoring or similar transactions);

(viii) the sale or other disposition of assets (other than Capital Stock of the Borrower or its Subsidiaries) from any Subsidiary of the Borrower to the Borrower or a Guarantor;

(ix) the sale or other disposition of assets (other than Capital Stock of the Borrower or its Subsidiaries) from any Subsidiary of the Borrower that is not a Guarantor to the Borrower or any of its Subsidiaries;

(x) the settlement, release or surrender of tort or other litigation claims held by Borrower or its Subsidiaries in good faith and in the ordinary course of business; provided that amount of such claims that are settled, released, or surrendered for cash shall not exceed $500,000 per occurrence or $1,000,000 in the aggregate in any twelve-month period (excluding any claims settled pursuant to the IGT Asset Purchase Agreement referred to in clause (xii) below); or

(xi) the sale and/or licensing to IGT of the rights described in the IGT Asset Purchase Agreement, including the “Assigned Intellectual Property” (as defined therein), but only to the extent that the sale or licensing to IGT of the rights described in the Asset Purchase Agreement could not reasonably be expected to materially and negatively impact the Loan Parties’ and their Subsidiaries’ other intellectual property rights or Collateral or result in a Material Adverse Affect.

 

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“ Permitted Indebtedness ” means:

(i) any Indebtedness owing to Administrative Agent or any Lender under this Agreement and the other Loan Documents;

(ii) Indebtedness listed in Section 6.02(b) of the Disclosure Schedule, and any Permitted Refinancing thereof (other than the Senior Secured Notes);

(iii) Indebtedness evidenced by Capitalized Lease Obligations made by the Loan Parties or their Subsidiaries in accordance with the provisions of Section 6.02(g), provided that the aggregate amount of such Indebtedness shall not exceed $250,000 at any time;

(iv) purchase money Indebtedness incurred to enable a Loan Party or any of its Subsidiaries to acquire equipment in the ordinary course of its business, provided that the aggregate amount of such Indebtedness shall not exceed $250,000 at any time;

(v) Indebtedness permitted under Section 6.02(e);

(vi) Indebtedness of the Borrower or any of its Subsidiaries under any Hedging Agreement so long as such Hedging Agreements are used solely as a part of its normal business operations as a risk management strategy or hedge against changes resulting from market operations and not as a means to speculate for investment purposes on trends and shifts in financial or commodities markets;

(vii) Indebtedness owed by one Loan Party to another Loan Party so long as the making of the investment by the Loan Party that is acting as the lender is permitted hereunder;

(viii) Subordinated Debt;

(ix) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument and consisting of obligations in respect of cash management services, overdraft protections and similar arrangements in each case in connection with cash management and deposit accounts arising in the ordinary course of business; provided that any such Indebtedness is extinguished within 5 Business Days of its incurrence; and

(x) Indebtedness in respect of letters of credit obtained by any Loan Parties in the ordinary course of business in connection with any lease to which such Loan Party is a party; provided that the aggregate amount of such Indebtedness shall not exceed $250,000 at any time.

“ Permitted Investments ” means (i) marketable direct obligations issued or unconditionally guaranteed by the United States Government or issued by any agency or instrumentality thereof and backed by the full faith and credit of the United States, in each case, maturing within six months from the date of acquisition thereof; (ii) commercial paper, maturing not more than 270 days after the date of issue rated P-1 by Moody’s or A-1 by Standard & Poor’s;

 

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(iii) certificates of deposit maturing not more than 270 days after the date of issue, issued by commercial banking institutions and money market or demand deposit accounts maintained at commercial banking institutions, each of which is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $500,000,000; (iv) repurchase agreements having maturities of not more than 90 days from the date of acquisition which are entered into with banks included in the commercial banking institutions described in clause (iii) above and which are secured by readily marketable direct obligations of the United States Government or any agency thereof, (v) money market accounts maintained with mutual funds having assets in excess of $2,500,000,000; and (vi) tax exempt securities rated A or better by Moody’s or A+ or better by Standard & Poor’s.

“ Permitted Liens ” means:

(i) Liens securing the Obligations;

(ii) Liens for taxes, assessments, levies, and governmental charges the payment of which is not required under Section 6.01(c);

(iii) Liens imposed by law, such as carriers’, warehousemen’s, mechanics’, materialmen’s and other similar Liens arising (provided they are subordinate to Administrative Agent’s Liens on Collateral) in the ordinary course of business and securing obligations (other than Indebtedness for borrowed money) that are not overdue by more than 30 days or are being contested in good faith and by appropriate proceedings promptly initiated and diligently conducted, and a reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor;

(iv) Liens described in Section 6.02(a) of the Disclosure Schedule, but not the extension of coverage thereof to other property or assets;

(v) Liens arising under Capitalized Leases or securing purchase money Indebtedness permitted under the definition of Permitted Indebtedness; provided , however , that (A) no such Lien shall extend to or cover any other property or assets of any Loan Party or any of its Subsidiaries, and (B) the principal amount of the Indebtedness secured by any such Lien shall not exceed the fair market value or the cost of the property so held or acquired;

(vi) deposits and pledges of cash securing (A) obligations incurred in respect of workers’ compensation, unemployment insurance or other forms of governmental insurance or benefits, (B) the performance of bids, tenders, leases, contracts (other than for the payment of money) and statutory obligations or (C) obligations on surety or appeal bonds, but only to the extent such deposits or pledges are made or otherwise arise in the ordinary course of business and secure obligations not past due;

(vii) easements, rights of way, municipal and zoning restrictions and similar encumbrances on real property and minor irregularities in the title thereto that do not (A) secure obligations for the payment of money or (B) materially impair the value of such property or its use by any Loan Party or any of its Subsidiaries in the normal conduct of such Person’s business;

 

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(viii) leases or subleases granted to other Persons not materially interfering with the conduct of the business of the Borrower or any of its Subsidiaries;

(ix) precautionary financing statement filings regarding operating leases;

(x) Liens arising out of the existence of judgments or awards not giving rise to an Event of Default;

(xi) statutory and common law landlords’ liens under leases to which the Borrower or any of its Subsidiaries is a party;

(xii) Liens securing refinancing Indebtedness permitted to be incurred hereunder; provided , that such Liens do not extend to any property or assets other than the property or assets that served as collateral for the refinanced Indebtedness;

(xiii) Liens securing Indebtedness permitted under clause (viii) or (x) of the definition of “Permitted Indebtedness”;

(xiv) Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of setoff or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution, and liens in favor of depository banks or securities intermediaries to secure customary fees and expenses;

(xv) interests of lessors under operating leases or interests or title of a licensor in the property subject to a license that is expressly permitted by this Agreement; and

(xvi) licenses by Borrower or any of its Subsidiaries of patents, trademarks, copyrights, or other intellectual property rights in connection with a Disposition expressly permitted by clause (v) of the definition of “Permitted Dispositions”.

“ Permitted Refinancing ” means any extension, refinancing, or modification of any Indebtedness; provided that (i) such extension, refinancing or modification is pursuant to terms that are not less favorable to the Loan Parties and their Subsidiaries and the Lenders than the terms of the Indebtedness being extended, refinanced or modified, (ii) after giving effect to such extension, refinancing or modification, the amount of such Indebtedness is not greater than the amount of Indebtedness outstanding immediately prior to such extension, refinancing or modification plus accrued interest thereon and the fees incurred in connection with the extension, refinancing, or modification, (iii) such extension, refinancing or modification does not result in an increase in the interest rate with respect to the Indebtedness so extended, refinanced, or modified, (iv) such extension, refinancing or modification does not result in a shortening of the average weighted maturity of the Indebtedness so extended, refinanced, or modified, or in the case of the IGT Subordinated Debt, a maturity date earlier than the maturity date of the IGT Subordinated Debt, (v) if the Indebtedness that is extended, refinanced, or modified was subordinated in right of payment to the Obligations, then the terms and conditions of the extension, refinancing, or modification must include subordination terms and conditions that are at least as favorable to Administrative Agent and the Lenders as those that were applicable to the extended, refinanced, or modified Indebtedness, (vi) the covenants and events of default of the

 

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Indebtedness that is extended, refinanced or modified are not less favorable to the Loan Parties, Administrative Agent or the Lenders than the terms and conditions of the Indebtedness being extended, refinanced, or modified, and (vii) the Indebtedness that is extended, refinanced, or modified is not recourse to any Person that is liable on account of the Obligations other than those Persons which were obligated with respect to the Indebtedness that was extended, refinanced, or modified.

“ Person ” means an individual, corporation, limited liability company, partnership, association, joint-stock company, trust, unincorporated organization, joint venture or other enterprise or entity or Governmental Authority.

“ Post-Default Rate ” means a rate of interest per annum equal to the rate of interest otherwise in effect from time to time pursuant to the terms of this Agreement plus 5.00%, or, if a rate of interest is not otherwise in effect, interest at the rate specified herein for the Revolving Loans prior to the Event of Default plus 5.00%.

“ Preferred Stock ” means, as applied to the Capital Stock of any Person, the Capital Stock of any class or classes (however designated) that is preferred with respect to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person.

“ Pro Rata Shares ” means, with respect to any Lender, a Lender’s Revolving Pro Rata Share or Term Pro Rata Share, as the context may require.

“ Prohibited Preferred Stock ” means any Preferred Stock that by its terms is mandatorily redeemable or subject to any other payment obligation (including any obligation to pay dividends, other than dividends of shares of Preferred Stock of the same class and series payable in kind or dividends of shares of common stock) on or before a date that is less than 6 months after the Final Maturity Date, or, on or before the date that is less than 6 months after the Final Maturity Date, is redeemable at the option of the holder thereof for cash or assets or securities (other than distributions in kind of shares of Preferred Stock of the same class and series or of shares of common stock).

“ property ” means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible.

“ Qualified Cash ” means, as of any date of determination, the amount of unrestricted cash and Cash Equivalents of the Borrower and its Subsidiaries, provided that at least 67% of the aggregate amount of such unrestricted cash and Cash Equivalents shall be on deposit with banks, or in securities accounts with securities intermediaries, or any combination thereof and subject to a control agreement in favor of Administrative Agent and upon which Administrative Agent has a perfected first priority Lien.

“ Reference Rate ” means the greater of (i) the rate of interest reported as the prime rate in The Wall Street Journal (or the average prime rate if a high and a low prime rate are therein reported), and (ii) 5.00%. The Reference Rate shall be set on the Initial Funding Date and reset once per month on the first Business Day of each month. If The Wall Street Journal does not

 

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then or ceases to report such a prime rate, the Reference Rate shall thereafter be determined by such alternate method as may be reasonably selected by Administrative Agent.

“ Register ” has the meaning specified therefor in Section 11.07(d).

“ Registered Loan ” has the meaning specified therefore in Section 11.07(d).

“ Registration Rights Agreement ” means that certain Registration Rights Agreement dated as of the Initial Funding Date between Private Equity Management Group Financial Corporation and the Borrower.

“ Regulation T ”, “ Regulation U ” and “ Regulation X ” mean, respectively, Regulations T, U and X of the Board or any successor, as the same may be amended or supplemented from time to time.

“ Reinvestment Eligible Funds ” means (a) Net Cash Proceeds which, but for the application of Section 2.06(d), would be required to be used to prepay the Loans pursuant to Section 2.06(c)(iii) or (b) Extraordinary Receipts consisting of insurance or condemnation proceeds paid as the result of loss, destruction, casualty, condemnation or expropriation which, but for the application of Section 2.06(d), would be required to be used to prepay the Loans pursuant to Section 2.06(c)(v).

“ Reinvestment Notice ” has the meaning specified therefor in Section 2.06(d).

“ Related Fund ” means a fund, money market account, investment account or other account managed by a Lender or an Affiliate of such Lender or its investment manager.

“ Release ” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, seeping, migrating, dumping or disposing of any Hazardous Material (including the abandonment or discarding of barrels, containers and other closed receptacles containing any Hazardous Material) into the indoor or outdoor environment, including the movement of Hazardous Materials through or in the ambient air, soil, surface or ground water, or property.

“ Remedial Action ” means all actions taken to (i) clean up, remove, remediate, contain, treat, monitor, assess, evaluate or in any other way address Hazardous Materials in the indoor or outdoor environment; (ii) prevent or minimize a Release or threatened Release of Hazardous Materials so they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment; (iii) perform pre-remedial studies and investigations and post-remedial operation and maintenance activities; or (iv) any other actions authorized by 42 U.S.C. § 9601.

“ Renewal Fee ” has the meaning specified therefor in Section 2.07(c).

“ Reportable Event ” means an event described in Section 4043 of ERISA (other than an event not subject to the provision for 30-day notice to the PBGC under the regulations promulgated under such Section).

 

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“ Required Lenders ” means Lenders whose Total Pro Rata Shares aggregate more than 50%.

“ Required Library ” means, as of any date of determination, the set or collection of copyrights in the source code (excluding manuals or other similar documentation) for the software owned or exclusively licensed by any Loan Party which software generated not less than 90% of the aggregate amount of current revenues attributable to software owned or exclusively licensed by any Loan Party during the 12 month period immediately preceding the date of determination. For purposes of copyright registration such Required Library shall include all a.x releases of the software programs that comprise the Required Library.

“ Revolving Credit Commitment ” means, with respect to each Lender, the commitment of such Lender to make Revolving Loans to the Borrower in the amount set forth opposite such Lender’s name in Schedule 1.01 hereto, as such amount may be terminated or reduced from time to time in accordance with the terms of this Agreement.

“ Revolving Loan ” and “ Revolving Loans ” have the meaning specified therefor in Section 2.01(a).

“ Revolving Maturity Date ” means the earliest of (i) the third anniversary of the Initial Funding Date, and (ii) the date on which all or any portion of the Obligations shall become due and payable pursuant to the terms of Section 8.01.

“ Revolving Pro Rata Share ” means the percentage obtained by dividing (A) such Lender’s Revolving Credit Commitment, by (B) the Total Revolving Credit Commitment, provided, that, if the Total Revolving Credit Commitment has been reduced to zero, the numerator shall be the aggregate unpaid principal amount of such Lender’s Revolving Loans (including Administrative Agent Advances) and the denominator shall be the aggregate unpaid principal amount of all Revolving Loans (including Administrative Agent Advances).

“ SEC ” means the Securities and Exchange Commission or any other similar or successor agency of the Federal government administering the Securities Act.

“ Securities ” means (i) the shares of Borrower’s common stock issuable on the Initial Funding Date or thereafter as “Additional Shares,” in each case pursuant to the Common Stock and Warrant Purchase Agreement, (ii) the Warrant, and (iii) the Warrant Shares.

“ Securities Act ” means the Securities Act of 1933, as amended, or any similar Federal statute, and the rules and regulations of the SEC thereunder, all as the same shall be in effect from time to time.

“ Senior Debt Service Coverage Ratio ” means, at any date of determination, the ratio of:

(a) (i) Adjusted Consolidated EBITDA, less (ii) the aggregate amount of all cash Capital Expenditures for the maintenance, repair, restoration or refurbishment of Borrower’s or its Subsidiaries’ properties, less (iii) the aggregate amount of Federal, state, local and foreign income taxes paid in cash; to

 

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(b) the sum of (i) Senior Interest Charges, and (ii) the aggregate principal amount of all regularly scheduled principal payments or redemptions or similar acquisitions for value of outstanding debt for borrowed money (other than Subordinated Debt), but excluding any such payments to the extent refinanced through the incurrence of additional Permitted Indebtedness otherwise expressly permitted under this Agreement, in each case, of or by Borrower and its Subsidiaries for the relevant Measurement Period.

“ Senior Interest Charges ” means, as of each date of determination, the sum of cash paid or payable for (a) all interest, premium payments, debt discount, fees, charges and related expenses in connection with (i) borrowed money (including capitalized interest) other than Subordinated Debt and (ii) in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP, (b) all interest paid or payable with respect to discontinued operations and (c) the portion of rent expense under Capitalized Leases that is treated as interest in accordance with GAAP, in each case, of or by Borrower and its Subsidiaries on a consolidated basis for the relevant Measurement Period.

“ Senior Secured Notes ” means the 11.875% Senior Secured Notes due 2008 issued by the Borrower pursuant to the Indenture.

“ Shareholders’ Equity ” means, as of any date of determination, consolidated shareholders’ equity of the Borrower and its Subsidiaries as of that date determined in accordance with GAAP.

“ Solvent ” means, with respect to any Person on a particular date, that on such date (i) the fair value of the property of such Person is not less than the total amount of the liabilities of such Person, (ii) the present fair salable value of the assets of such Person, on a consolidated basis, is not less than the amount that will be required to pay the probable liability of such Person on its existing debts as they become absolute and matured considering all financing alternatives and potential asset sales reasonably available to such Person, (iii) such Person reasonably expects to be able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (iv) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature taking into account the timing and amounts of cash to be received by it or any of its Subsidiaries (considering all financing alternatives and potential asset sales reasonably available to such Person) and the timing and amounts of cash to be payable on in respect of its debts and liabilities, and (v) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute unreasonably small capital.

“ Source Code Escrow Agreement ” has the meaning specified therefor in the Borrower Security Agreement and the Guarantor Security Agreement.

“ Standard & Poor’s ” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. and any successor thereto.

“ Stock Acquisition ” means the purchase or other acquisition by the Borrower or any of its wholly-owned Subsidiaries of all of the Capital Stock (by merger, stock purchase or otherwise) of any other Person.

 

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“ Subordinated Debt ” means Indebtedness of the Borrower that is on terms and conditions (including payment terms, interest rates, covenants, remedies, defaults and other material terms) satisfactory to Administrative Agent and the Required Lenders and which has been expressly subordinated in right of payment to all Indebtedness of the Borrower under the Loan Documents by the execution and delivery of a subordination agreement, in form and substance reasonably satisfactory to Administrative Agent and the Required Lenders, including, without limitation, the IGT Subordinated Debt.

“ Subsidiary ” means, with respect to any Person at any date, any corporation, limited or general partnership, limited liability company, trust, estate, association, joint venture or other business entity (i) the accounts of which would be consolidated with those of such Person in such Person’s consolidated financial statements if such financial statements were prepared in accordance with GAAP or (ii) of which more than 50% of (A) the outstanding Capital Stock having (in the absence of contingencies) ordinary voting power to elect a majority of the board of directors or other managing body of such Person, (B) in the case of a partnership or limited liability company, the interest in the capital or profits of such partnership or limited liability company or (C) in the case of a trust, estate, association, joint venture or other entity, the beneficial interest in such trust, estate, association or other entity business is, at the time of determination, owned or controlled directly or indirectly through one or more intermediaries, by such Person.

“ Taxes ” has the meaning specified therefor in Section 2.08(a).

“ Term Commitment ” means, with respect to each Lender, the commitment of such Lender to make Term Loans to the Borrower on the Initial Funding Date in the amount set forth opposite such Lender’s name in Schedule 1.01 hereto.

“ Term Loan ” and “ Term Loans ” have the meaning specified therefor in Section 2.02.

“ Term Maturity Date ” means the earliest of (i) the second anniversary of the Initial Funding Date, as the same may be extended pursuant to Section 2.09, and (ii) the date on which all or any portion of the Obligations shall become due and payable pursuant to the terms of Section 8.01.

“ Term Pro Rata Share ” means the percentage obtained by dividing (A) the aggregate unpaid principal amount of such Lender’s Term Loans, by (B) the aggregate unpaid principal amount of all Term Loans.

“ Termination Event ” means (i) a Reportable Event with respect to any Employee Plan, (ii) any event that causes any Loan Party or any of its Subsidiaries or any of their respective ERISA Affiliates to incur liability under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 4971 or 4975 of the IRC, (iii) the filing of a notice of intent to terminate an Employee Plan or the treatment of an Employee Plan amendment as a termination under Section 4041 of ERISA, (iv) the institution of proceedings by the PBGC to terminate an Employee Plan, or (v) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Employee Plan.

 

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“ Title Insurance Policy ” means a mortgagee’s loan policy, in form and substance satisfactory to Administrative Agent, together with all endorsements made from time to time thereto, issued by or on behalf of a title insurance company satisfactory to Administrative Agent, insuring the Lien created by a Mortgage in an amount and on terms satisfactory to Administrative Agent, delivered to Administrative Agent.

“ Total Debt Service Coverage Ratio ” means, at any date of determination, the ratio of (a) (i) Adjusted Consolidated EBITDA, less (ii) the aggregate amount of all cash Capital Expenditures for the maintenance, repair, restoration or refurbishment of Borrower’s or its Subsidiaries’ properties, less (iii) the aggregate amount of Federal, state, local and foreign income taxes paid in cash to (b) the sum of (i) Consolidated Interest Charges, and (ii) the aggregate principal amount of all regularly scheduled principal payments or redemptions or similar acquisitions for value of outstanding debt for borrowed money, but excluding any such payments to the extent refinanced through the incurrence of additional Permitted Indebtedness otherwise expressly permitted under this Agreement, in each case, of or by Borrower and its Subsidiaries for the relevant Measurement Period.

“ Total Pro Rata Share ” means the percentage obtained by dividing (A) such Lender’s Revolving Credit Commitment and the aggregate unpaid principal amount of such Lender’s Term Loans by (B) the Total Revolving Credit Commitment and the aggregate unpaid principal amount of all Term Loans, provided , that, to the extent the Total Revolving Credit Commitment has been reduced to zero, the numerator shall be the aggregate unpaid principal amount of such Lender’s Revolving Loans and Term Loans (including Administrative Agent Advances) and the denominator shall be the aggregate unpaid principal amount of all Revolving Loans and Term Loans (including Administrative Agent Advances).

“ Total Revolving Credit Commitment ” means the sum of the amounts of the Lenders’ Revolving Credit Commitments, which amount is $12,500,000 as of the Initial Funding Date.

“ Total Term Commitment ” means the sum of the amounts of the Lenders’ Term Commitments, which amount is $15,000,000 as of the Initial Funding Date.

“ Transferee ” has the meaning specified therefor in Section 2.08(a).

“ Unused Line Fee ” has the meaning specified therefor in Section 2.07(b).

“ WARN ” has the meaning specified therefor in Section 5.01(w).

“ Warrant ” means that certain Warrant dated as of the Initial Funding Date, evidencing the right of Private Equity Management Group Financial Corporation to purchase certain shares of common Capital Stock of the Borrower, in substantially the same form as attached hereto as Exhibit E.

“ Warrant Shares ” means the shares of common Capital Stock issuable upon exercise of the Warrant.

Section 1.02 Terms Generally . The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require,

 

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any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation,” whether or not so expressly stated in each such instance and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise, (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. References in this Agreement to “determination” by Administrative Agent include estimates honestly made by Administrative Agent (in the case of quantitative determinations) and beliefs honestly held by Administrative Agent (in the case of qualitative determinations).

Section 1.03 Accounting and Other Terms . Unless otherwise expressly provided herein, each accounting term used herein shall have the meaning given it under GAAP. All terms used in this Agreement which are defined in Article 8 or Article 9 of the Code and which are not otherwise defined herein shall have the same meanings herein as set forth therein.

Section 1.04 Time References . Unless otherwise indicated herein, all references to time of day refer to Pacific Standard Time or Pacific daylight saving time, as in effect in Los Angeles, California on such day. For purposes of the computation of a period of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each means “to but excluding”; provided, however, that with respect to a computation of fees or interest payable to Administrative Agent or any Lender, such period shall in any event consist of at least one full day.

 

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ARTICLE II

THE LOANS

Section 2.01 Revolving Credit Commitments .

(a) Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Lender severally agrees to make loans (each, a “ Revolving Loan ” and, collectively, the “ Revolving Loans ”) to the Borrower at any time and from time to time from the Initial Funding Date to the Revolving Maturity Date, or until the earlier reduction of its Revolving Credit Commitment to zero in accordance with the terms hereof, in an aggregate principal amount of Revolving Loans at any time outstanding not to exceed the lesser of (A) the amount of such Lender’s Revolving Credit Commitment, and (B) the amount of such Lender’s Revolving Pro Rata Share of the then extant Borrowing Base.

(b) Notwithstanding the foregoing, the aggregate principal amount of Revolving Loans outstanding at any time to the Borrower shall not exceed the lower of (A) the Total Revolving Credit Commitment and (B) the then current Borrowing Base. The Revolving Credit Commitment of each Lender shall automatically and permanently be reduced to zero on the Revolving Maturity Date. Within the foregoing limits, the Borrower may borrow, repay and reborrow the Revolving Loans, on or after the Initial Funding Date and prior to the Revolving Maturity Date, subject to the terms, provisions and limitations set forth herein.

Section 2.02 Term Commitments . Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Lender severally agrees to a single loan (each, a “ Term Loan ” and, collectively, the “ Term Loans ”) to the Borrower on the Initial Funding Date in an amount not to exceed such Lender’s Term Commitment. Amounts borrowed under this Section 2.02 and repaid or prepaid may not be reborrowed.

Section 2.03 Making the Loans .

(a) The Borrower shall give Administrative Agent prior telephonic notice (immediately confirmed in writing, in substantially the form of Exhibit C hereto (a “ Notice of Borrowing ”)), not later than 11:00 a.m. on the date which is 3 Business Days prior to the date of the proposed Loan (or such shorter period as Administrative Agent is willing, in its sole discretion, to accommodate from time to time). Such Notice of Borrowing shall be irrevocable and shall specify (i) the principal amount of the proposed Loans, (ii) whether the proposed Loans are to be made under the Revolving Credit Commitments or Term Commitments and (iii) the proposed borrowing date, which must be a Business Day. Administrative Agent and the Lenders may act without liability upon the basis of written, telecopied or telephonic notice believed by Administrative Agent in good faith to be from the Borrower (or from any Authorized Officer thereof designated in writing purportedly from the Borrower to Administrative Agent). The Borrower hereby waives the right to dispute Administrative Agent’s record of the terms of any such telephonic Notice of Borrowing. Administrative Agent and each Lender shall be entitled

 

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to rely conclusively on any Authorized Officer’s authority to request Loans on behalf of the Borrower until Administrative Agent receives written notice to the contrary. Administrative Agent and the Lenders shall have no duty to verify the authenticity of the signature appearing on any written Notice of Borrowing.

(b) Each Notice of Borrowing pursuant to this Section 2.03 shall be irrevocable and the Borrower shall be bound to make a borrowing in accordance therewith. Each Loan shall be made in a minimum amount of $1,000,000 and shall be in integral multiples of $100,000 in excess thereof.

(c)    (i) Except as otherwise provided in this Section 2.03(c), all Loans under this Agreement shall be made by the applicable Lenders simultaneously and proportionately to their Pro Rata Shares of the Total Revolving Credit Commitment or Total Term Commitment, as applicable, it being understood that no Lender shall be responsible for any default by any other Lender in that other Lender’s obligations to make a Loan requested hereunder, nor shall the Commitment of any Lender be increased or decreased as a result of the default by any other Lender in that other Lender’s obligation to make a Loan requested hereunder, and each Lender shall be obligated to make the Loans required to be made by it by the terms of this Agreement regardless of the failure by any other Lender.

(ii) Notwithstanding any other provision of this Agreement, and in order to reduce the number of fund transfers among the Borrower, Administrative Agent and the Lenders, the Borrower, Administrative Agent and the Lenders agree that Administrative Agent may (but shall not be obligated to), and the Borrower and the Lenders hereby irrevocably authorize Administrative Agent to, fund, on behalf of the Lenders with a Revolving Credit Commitment, Revolving Loans pursuant to Section 2.01, subject to the procedures for settlement set forth in Section 2.03(d); provided , however , that (a) Administrative Agent shall in no event fund any such Revolving Loans if Administrative Agent shall have received written notice from Administrative Agent or the Required Lenders prior to the time of the proposed Revolving Loans that one or more of the conditions precedent contained in Section 4.03 will not be satisfied at the time of the proposed Revolving Loans, and (b) Administrative Agent shall not otherwise be required to determine that, or take notice whether, the conditions precedent in Section 4.03 have been satisfied. If the Borrower gives a Notice of Borrowing requesting Revolving Loans and Administrative Agent elects not to fund such Revolving Loans on behalf of the Lenders, then promptly after receipt of the Notice of Borrowing requesting such Revolving Loans, Administrative Agent shall notify each Lender of the specifics of the requested Revolving Loans and that it will not fund the requested Revolving Loans on behalf of the Lenders. If Administrative Agent notifies the Lenders that it will not fund the requested Revolving Loans on behalf of such Lenders, each Lender shall make its Revolving Pro Rata Share of the requested Revolving Loans available to Administrative Agent, in immediately available funds, at the Payment Office no later than 12:00 p.m. on the date of the proposed Revolving Loans. Administrative Agent will make the proceeds of such Revolving Loans available

 

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to the Borrower on the day of the proposed Revolving Loans by causing an amount, in immediately available funds, equal to the proceeds of all such Revolving Loans received by Administrative Agent at the Payment Office or the amount funded by Administrative Agent on behalf of Lenders to be deposited in an account designated by the Borrower.

(iii) If Administrative Agent has notified the Lenders that Administrative Agent, on behalf of such Lenders, will fund particular Revolving Loans pursuant to Section 2.03(c)(ii), Administrative Agent may assume that each such Lender has made its Revolving Pro Rata Shares of such requested Revolving Loans available to Administrative Agent on such day and Administrative Agent, in its sole discretion, may, but shall not be obligated to, cause a corresponding amount to be made available to the Borrower on such day. If Administrative Agent makes such corresponding amount available to the Borrower and such corresponding amount is not in fact made available to Administrative Agent by any such Lender, Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from the date such payment was due until the date such amount is paid to Administrative Agent, at the Federal Funds Rate for 3 Business Days and thereafter at the Reference Rate. During the period in which such Lender has not paid such corresponding amount to Administrative Agent, notwithstanding anything to the contrary contained in this Agreement or any other Loan Document, the amount so advanced by Administrative Agent to the Borrower shall, for all purposes hereof, be a Revolving Loan made by Administrative Agent for its own account. Upon any such failure by a Lender to pay Administrative Agent, Administrative Agent shall promptly thereafter notify the Borrower of such failure and the Borrower shall immediately pay such corresponding amount to Administrative Agent for its own account.

(iv) Nothing in this Section 2.03(c) shall be deemed to relieve any Lender from its obligations to fulfill its Revolving Credit Commitment or Term Commitment hereunder or to prejudice any rights that Administrative Agent or the Borrower may have against any Lender as a result of any default by such Lender hereunder.

(d) With respect to all periods for which Administrative Agent has funded Revolving Loans pursuant to Section 2.03(c), on Friday of each week, or if the applicable Friday is not a Business Day, then on the following Business Day, or such shorter period as Administrative Agent may from time to time select (any such week or shorter period being herein called a “ Settlement Period ”), Administrative Agent shall notify each Lender of the unpaid principal amount of the Revolving Loans outstanding as of the last day of each such Settlement Period. In the event that such amount is greater than the unpaid principal amount of the Revolving Loans outstanding on the last day of the Settlement Period immediately preceding such Settlement Period (or, if there has been no preceding Settlement Period, the amount of the Revolving Loans made on the date of such Lender’s initial funding), each Lender shall promptly (and in any event not later than 11:00 a.m.) make available to Administrative Agent its Revolving Pro Rata

 

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Share of the difference in immediately available funds. In the event that such amount is less than such unpaid principal amount, Administrative Agent shall promptly pay over to each Lender its Revolving Pro Rata Share of the difference in immediately available funds. In addition, if Administrative Agent shall so request at any time when a Default or an Event of Default shall have occurred and be continuing, or any other event shall have occurred as a result of which Administrative Agent shall determine that it is desirable to present claims against the Borrower for repayment, each Lender shall promptly remit to Administrative Agent or, as the case may be, Administrative Agent shall promptly remit to each Lender, sufficient funds to adjust the interests of the Lenders in the then outstanding Revolving Loans to such an extent that, after giving effect to such adjustment, each such Lender’s interest in the then outstanding Revolving Loans will be equal to its Revolving Pro Rata Share thereof. The obligations of Administrative Agent and each Lender under this Section 2.03(d) shall be absolute and unconditional. Each Lender shall only be entitled to receive interest on its Revolving Pro Rata Share of the Revolving Loans which have been funded by such Lender.

(e) In the event that any Lender fails to make any payment required to be made by it pursuant to Section 2.03(d), Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from the date such payment was due until the date such amount is paid to Administrative Agent, at the Federal Funds Rate for 3 Business Days and thereafter at the Reference Rate. During the period in which such Lender has not paid such corresponding amount to Administrative Agent, notwithstanding anything to the contrary contained in this Agreement or any other Loan Document, the amount so advanced by Administrative Agent to the Borrower shall, for all purposes hereof, be a Revolving Loan made by Administrative Agent for its own account. Upon any such failure by a Lender to pay Administrative Agent, Administrative Agent shall promptly thereafter notify the Borrower of such failure and the Borrower shall immediately pay such corresponding amount to Administrative Agent for its own account. Nothing in this Section 2.03(e) shall be deemed to relieve any Lender from its obligation to fulfill its Revolving Credit Commitment hereunder or to prejudice any rights that Administrative Agent or the Borrower may have against any Lender as a result of any default by such Lender hereunder.

Section 2.04 Repayment of the Loans; Evidence of Debt .

(a) The outstanding principal of all Revolving Loans shall be due and payable on the Revolving Maturity Date.

(b) The Borrower shall repay to the Lenders the aggregate principal amount of the Term Loans in monthly installments of $312,500, commencing on the first anniversary of the Initial Funding Date and continuing on the first Business Day of each month thereafter; provided , however , that the final principal repayment installment of the Term Loans shall be repaid on the Term Maturity Date and in any event shall be in an amount equal to the aggregate principal amount of all Term Loans outstanding on such date.

 

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(c) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the Indebtedness of the Borrower to such Lender resulting from the Loans made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

(d) Administrative Agent shall maintain accounts in which it shall record (i) the amount of the Loans made hereunder, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.

(e) The entries made in the accounts maintained pursuant to paragraphs (c) or (d) of this Section 2.04 shall be conclusive evidence of the existence and amounts of the obligations recorded therein absent manifest error; provided that the failure of any Lender or Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement.

(f) Any Lender may request the Loans made by it be evidenced by a promissory note. In such event, the Borrower shall execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) in a form furnished by Administrative Agent and reasonably satisfactory to the Borrower. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 11.07) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns).

Section 2.05 Interest .

(a) Revolving Loans . Each Revolving Loan shall bear interest on the principal amount thereof from time to time outstanding, from the date of the making of such Revolving Loan until the date on which such principal amount is repaid in accordance herewith, at a variable rate per annum equal to the Reference Rate plus 4.50%.

(b) Term Loans . Each Term Loan shall bear interest on the principal amount thereof from time to time outstanding, from the date of the making of such Term Loan until the date on which such principal amount is repaid in accordance herewith, at a fixed rate per annum equal to 10%.

(c) Default Interest . To the extent permitted by law, upon the occurrence and during the continuance of an Event of Default, the principal of, and all accrued and unpaid interest on, the Loans, fees, indemnities or any other Obligations of the Loan Parties under this Agreement and the other Loan Documents, shall bear interest, from the date such Event of Default occurred until the date such Event of Default is cured or waived in writing in accordance herewith, at a rate per annum equal at all times to the Post-Default Rate.

 

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(d) Interest Payment in respect of the Loans . Interest on each Loan shall be payable monthly, in arrears, on the first Business Day of each month, commencing on the first Business Day of the month following the month in which such Loan is made and at maturity (whether upon demand, by acceleration or otherwise); provided , however , that interest accruing at the Post-Default Rate shall be payable on demand. The Borrower hereby authorizes Administrative Agent to, and Administrative Agent may, from time to time, charge the Loan Account pursuant to Section 3.02 with the amount of any interest payment due hereunder.

(e) General . All interest shall be computed on the basis of a year of 360 days for the actual number of days, including the first day but excluding the last day, elapsed.

Section 2.06 Reduction of Commitments; Prepayment of Loans .

(a) Reduction of Commitments .

(i) The Total Revolving Credit Commitment shall terminate on the Revolving Maturity Date. Borrower shall pay, on the Revolving Maturity Date, any Applicable Prepayment Premium in connection with such reduction of the Total Revolving Credit Commitment.

(ii) The Borrower may reduce the Total Revolving Credit Commitment to an amount (which may be zero) not less than the sum of (A) the aggregate unpaid principal amount of all Revolving Loans then outstanding, and (B) the aggregate principal amount of all Revolving Loans not yet made as to which a Notice of Borrowing has been given by the Borrower under Section 2.03. Each such reduction shall be in an amount which is an integral multiple of $1,000,000 (unless the Total Revolving Credit Commitment in effect immediately prior to such reduction is less than $1,000,000), shall be made by providing not less than 5 Business Days prior written notice to the Administrative Agent, shall be irrevocable and shall be accompanied by the payment of the Applicable Prepayment Premium. Once reduced, the Total Revolving Credit Commitment may not be increased. Each such reduction of the Total Revolving Credit Commitment shall reduce the Revolving Credit Commitment of each Lender proportionately in accordance with its Revolving Pro Rata Share thereof.

(iii) The Total Term Commitments shall be automatically and permanently reduced to zero on the date the Term Loans are made.

(b) Optional Prepayment .

(i) Revolving Loans . The Borrower may prepay without penalty or premium the principal of any Revolving Loan, in whole or in part.

 

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(ii) Term Loans . The Borrower may prepay the principal of any Term Loan, in whole or in part, provided such prepayment is accompanied by the payment of the Applicable Prepayment Premium.

(c) Mandatory Prepayment .

(i) The Borrower will immediately prepay the Revolving Loans, without penalty or premium, at any time when the aggregate principal amount of all Revolving Loans exceeds the lesser of (A) the Total Revolving Credit Commitment, and (B) the Borrowing Base, to the full extent of any such excess. On each day a Revolving Loan is requested hereunder, the Borrower shall hereby be deemed to represent and warrant to Administrative Agent and the Lenders that the Borrowing Base calculated as of such day equals or exceeds the aggregate principal amount of all Revolving Loans outstanding on such day (after giving effect to such proposed Revolving Loan).

(ii) Within five Business Days after financial statements have been delivered pursuant to Section 6.01(a)(ii) and the related compliance certificate has been delivered pursuant to Section 6.01(a)(iv), at Administrative Agent’s request the Borrower shall prepay, without penalty or premium, an aggregate principal amount of Loans not to exceed 25% of Excess Cash Flow for the Fiscal Year covered by such financial statements.

(iii)(A) Immediately upon receipt of any proceeds of any Disposition by any Loan Party or its Subsidiaries other than a Permitted Disposition, the Borrower shall prepay the outstanding principal amount of the Loans in an amount equal to 100% of the Net Cash Proceeds received by such Person in connection with such Disposition and (B) immediately upon receipt of proceeds of any Disposition permitted pursuant to clause (iii) of the definition of Permitted Disposition in an aggregate amount greater than $250,000 but less than or equal to $500,000, the Borrower shall prepay the outstanding principal amount of the Loans in an amount equal to 50% of the Net Cash Proceeds received by such Person in connection with such Disposition, in each case together with any Applicable Prepayment Premium in respect thereof. Nothing contained in this clause (iii) shall permit any Loan Party or any of its Subsidiaries to make a Disposition of any property other than a Permitted Disposition.

(iv) Upon the issuance or incurrence by any Loan Party or any of its Subsidiaries of any Indebtedness (other than any Permitted Indebtedness), or the sale or issuance by any Loan Party or any of its Subsidiaries of any shares of its Capital Stock (other than sales or issuances of Capital Stock permitted pursuant to Section 6.02(c)), the Borrower shall prepay the Loans in an amount equal to 100% of the Net Cash Proceeds received by such Person in connection therewith, together with any Applicable Prepayment Premium in respect thereof. The provisions of this subsection (iv) shall not be deemed to be implied consent to any such issuance, incurrence or sale otherwise prohibited by the terms and conditions of this Agreement.

 

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(v) Upon the receipt by any Loan Party or any of its Subsidiaries of any Extraordinary Receipts, the Borrower shall prepay, without penalty or premium, the outstanding principal of the Loans in an amount equal to 100% of such Extraordinary Receipts, net of any reasonable expenses (including reasonable attorneys fees and costs and other litigation expenses) incurred in collecting such Extraordinary Receipts.

Notwithstanding the foregoing, with respect to any prepayment of the Loans pursuant to Sections 2.06(c)(ii), (iii), (iv) and (v), any Lender, at its option, may elect not to accept such prepayment. Any Lender declining such prepayment (a “Declining Lender”) shall give written notice of the same to the Administrative Agent no later than the Business Day immediately preceding the prepayment date. On the prepayment date, an amount equal to each Declining Lender’s portion of the prepayment amount shall be used to prepay, in accordance to Section 2.06(d), the Loans owing to the Lenders that have not declined such prepayment.

(d) Application of Payments .

(i) Each prepayment of Loans pursuant to the foregoing provisions of this Section 2.06 (other than prepayments made pursuant to Sections 2.06(b)(i) or (c)(i), which shall be applied to the Revolving Loans in accordance with clause (ii) of this Section 2.06(d)) shall be applied, first, ratably to the outstanding Term Loans and to the principal repayment installments thereof in inverse order of maturity and, second, to the Revolving Loans in the manner set forth in clause (ii) of this Section 2.06(d).

(ii) Each prepayment of the Revolving Loans pursuant to this Section 2.06 shall be applied ratably to the outstanding Revolving Loans without reducing the Total Revolving Credit Commitment.

(iii) Reinvestment Option . The foregoing provisions of this Section 2.06(d) to the contrary notwithstanding, Borrower shall not be required to make a prepayment otherwise required pursuant to Section 2.06(c)(iii) or Section 2.06(c)(v) with Reinvestment Eligible Funds so long as: (A) no Default or Event of Default has occurred and is continuing on the date such Person receives such Reinvestment Eligible Funds or on the date such amounts are to be released to Borrower pursuant to this Section 2.06(d), (B) the Borrower delivers a notice (a “ Reinvestment Notice ”) on or prior to the date that the applicable Person receives the monies constituting such Reinvestment Eligible Funds notifying Administrative Agent of the intent of the applicable Person to use such Reinvestment Eligible Funds (1) to repair, restore, or replace the assets that were the subject of the Disposition, casualty or condemnation giving rise to such amounts with assets of equal or greater fair market value which will be useful in the conduct of their business in accordance with past practice, (2) within the period specified in such notice, which period shall not to exceed the earlier of (x) 180 days after the receipt of such Reinvestment Eligible Funds by the applicable Loan Party or its Subsidiary and (y) the Final Maturity Date, and

 

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(C) pending the reinvestment described in clause (B)(1) above, such Reinvestment Eligible Funds are deposited in a cash collateral account over which Administrative Agent (on behalf of the Lenders) has a perfected first-priority Lien. If all or any portion of such Reinvestment Eligible Funds are not used in accordance with the preceding sentence within the period specified in the Reinvestment Notice, the remaining portion shall be applied to the Loans on the last day of such specified period in accordance with Section 2.06(d)(i).

(e) Interest and Fees . Any prepayment made pursuant to this Section 2.06 shall be accompanied by the payment of accrued interest on the principal amount being prepaid to the date of prepayment together with any Applicable Prepayment Premium in respect thereof, and if such prepayment would reduce the amount of the outstanding Loans to zero at a time when the Total Revolving Credit Commitment has been terminated, such prepayment shall be accompanied by the payment of all fees accrued to such date pursuant to Section 2.07.

(f) Cumulative Prepayments . Except as otherwise expressly provided in this Section 2.06, payments with respect to any subsection of this Section 2.06 are in addition to payments made or required to be made under any other subsection of this Section 2.06.

Section 2.07 Fees .

(a) Fee Letter . The Borrower shall pay to the Administrative Agent for its own account fees in the amounts and at the times specified in the Fee Letter. Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.

(b) Unused Line Fee . From and after the Effective Date and through the Revolving Maturity Date, the Borrower shall pay to Administrative Agent for the account of the Lenders, in accordance with their Revolving Pro Rata Shares, an unused line fee (the “ Unused Line Fee ”), which shall accrue at the rate per annum of 0.5% times the daily amount by which the Total Revolving Credit Commitment exceeds the outstanding principal amount of all Revolving Loans. The Unused Line Fee shall be due and payable monthly in arrears on the first Business Day of each calendar month commencing September 1, 2008, and on the Revolving Maturity Date.

(c) Renewal Fee . On each anniversary of the Effective Date occurring prior to the Revolving Maturity Date, the Borrower shall pay to the Administrative Agent for the account of the Lenders in accordance with their respective Revolving Pro Rata Shares, a non-refundable revolver renewal fee (the “ Renewal Fee ”) equal to $125,000.

Section 2.08 Taxes .

(a) Any and all payments by any Loan Party hereunder or under any other Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding taxes imposed on the net income of

 

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Administrative Agent or any Lender (or any transferee or assignee thereof, including a participation holder (any such entity, a “ Transferee” )) by the jurisdiction in which such Person is organized or has its principal lending office (all such nonexcluded taxes, levies, imposts, deductions, charges withholdings and liabilities, collectively or individually, “ Taxes ”). If any Loan Party shall be required to deduct any Taxes from or in respect of any sum payable hereunder to Administrative Agent or any Lender (or any Transferee), (i) the sum payable shall be increased by the amount (an “ additional amount ”) necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.08) Administrative Agent or such Lender (or such Transferee) shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) such Loan Party shall make such deductions and (iii) such Loan Party shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

(b) In addition, each Loan Party agrees to pay to the relevant Governmental Authority in accordance with applicable law any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Document (“ Other Taxes ”). Each Loan Party shall deliver to Administrative Agent and each Lender official receipts in respect of any Taxes or Other Taxes payable hereunder promptly after payment of such Taxes or Other Taxes.

(c) The Loan Parties hereby jointly and severally indemnify and agree to hold Administrative Agent and each Lender harmless from and against Taxes and Other Taxes (including, Taxes and Other Taxes imposed on any amounts payable under this Section 2.08) paid by such Person, whether or not such Taxes or Other Taxes were correctly or legally asserted. Such indemnification shall be paid within 10 days from the date on which any such Person makes written demand therefore specifying in reasonable detail the nature and amount of such Taxes or Other Taxes.

(d) Each Lender that is organized under the laws of a jurisdiction outside the United States (a “ Non-U.S. Lender ”) agrees that it shall, no later than the Initial Funding Date (or, in the case of a Lender which becomes a party hereto pursuant to Section 11.07 after the Initial Funding Date, promptly after the date upon which such Lender becomes a party hereto) deliver to Administrative Agent (or, in the case of a participant, to the Lender granting the participation only) a properly completed and duly executed copy of either U.S. Internal Revenue Service Form W-8BEN, W-8ECI or W-8IMY or any subsequent versions thereof or successors thereto, in each case claiming complete exemption from, or reduced rate of, U.S. Federal withholding tax and payments of interest hereunder. In addition, in the case of a Non-U.S. Lender claiming exemption from U.S. Federal withholding tax under Section 871(h) or 881(c) of the IRC, such Non-U.S. Lender hereby represents to Administrative Agent and the Borrower that such Non-U.S. Lender is not a bank for purposes of Section 881(c) of the IRC, is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the IRC) of the Borrower and is not a controlled foreign corporation related to the Borrower (within the meaning of Section 864(d)(4) of the IRC), and such Non-U.S. Lender agrees that it shall promptly

 

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notify Administrative Agent, the assigning Lender or the Lender granting a participation, as applicable, in the event any such representation is no longer accurate. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement and on or before the date, if any, such Non-U.S. Lender changes its applicable lending office by designating a different lending office (a “ New Lending Office ”). In addition, such Non-U.S. Lender shall deliver such forms within 20 days after receipt of a written request therefor from Administrative Agent, the assigning Lender or the Lender granting a participation, as applicable. Notwithstanding any other provision of this Section 2.08, a Non-U.S. Lender shall not be required to deliver any form pursuant to this Section 2.08(d) that such Non-U.S. Lender is not legally able to deliver.

(e) The Loan Parties shall not be required to indemnify any Non-U.S. Lender, or pay any additional amounts to any Non-U.S. Lender, in respect of United States Federal withholding tax pursuant to this Section 2.08 to the extent that (i) the obligation to withhold amounts with respect to United States Federal withholding tax existed on the date such Non-U.S. Lender became a party to this Agreement (or, in the case of a Transferee that is a participation holder, on the date such participation holder became a Transferee hereunder) or, with respect to payments to a New Lending Office, the date such Non-U.S. Lender designated such New Lending Office with respect to a Loan; provided , however , that this clause (i) shall not apply to the extent the indemnity payment or additional amounts any Transferee, or Lender (or Transferee) through a New Lending Office, would be entitled to receive (without regard to this clause (i)) do not exceed the indemnity payment or additional amounts that the Person making the assignment, participation or transfer to such Transferee, or Lender (or Transferee) making the designation of such New Lending Office, would have been entitled to receive in the absence of such assignment, participation, transfer or designation, or (ii) the obligation to pay such additional amounts would not have arisen but for a failure by such Non-U.S. Lender to comply with the provisions of clause (d) above.

(f) The obligations of the Loan Parties under this Section 2.08 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.

Section 2.09 Extension of Term Maturity Date .

(a) Extension of Term Maturity Date . At any time not earlier than 60 days and not later than 15 days prior to the Term Maturity Date, the Borrower may request by notice to Administrative Agent (who shall promptly notify the Lenders) (a “ Request for Extension of Term Maturity Date ”) that the Term Maturity Date be extended once by one year in accordance with this Section. Upon timely receipt by Administrative Agent of a Request for Extension of Term Maturity Date and the satisfaction of the following conditions precedent in a manner satisfactory to Administrative Agent, the Term Maturity Date shall be extended for one year:

(i) Borrower shall have delivered to Administrative Agent a certificate of each Loan Party dated as of the Term Maturity Date duly executed by an Authorized Officer of such Loan Party (i) certifying and attaching the

 

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resolutions adopted by such Loan Party approving or consenting to such extension and (ii) in the case of Borrower, certifying that, before and after giving effect to such extension, (A) the representations and warranties contained in this Agreement and the other Loan Documents are true and correct on and as of the Term Maturity Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, and (B) no Default or Event of Default exists;

(ii) No Default or Event of Default shall have occurred and be continuing as the Term Maturity Date; and

(iii) Borrower shall have paid to Administrative Agent, for the benefit of the Lenders in accordance with their Term Pro Rata Shares, an extension fee equal to 1.00% of the then outstanding principal amount of the Term Loans.

 

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ARTICLE III

FEES, PAYMENTS AND OTHER COMPENSATION

Section 3.01 Audit and Collateral Monitoring Fees . The Borrower acknowledges that pursuant to Section 6.01(f), representatives of Administrative Agent may visit any Loan Party or its Subsidiaries or conduct audits, inspections or field examinations of any Loan Party or its Subsidiaries and valuations or appraisals of any or all of the Collateral or business or enterprise valuations of the Loan Parties or their Subsidiaries at any time, from time to time. So long as no Default or Event of Default shall have occurred and be continuing, such audits, inspections and examinations will be at reasonable times and in reasonable intervals, in a manner so as to not unduly disrupt the business of such Loan Party or its Subsidiaries, and if an Event of Default shall have occurred and be continuing, such access shall not be limited. The Borrower agrees to pay (i) all actual out-of-pocket costs and expenses (including, without limitation, traveling expenses) incurred in connection with all such visits, audits, inspections, valuations, and field examinations and (ii) the reasonable cost of all audits, appraisals and business valuations (including enterprise valuation appraisals) conducted by third party auditors or appraisers on behalf of Administrative Agent.

Section 3.02 Payments; Computations and Statements .

(a) The Borrower will make each payment under this Agreement not later than 9:00 a.m. on the day when due, in lawful money of the United States of America and in immediately available funds, to Administrative Agent’s Account. All payments received by Administrative Agent after 9:00 a.m. on any Business Day will be credited to the Loan Account on the next succeeding Business Day. All payments shall be made by the Borrower without set-off, counterclaim, deduction or other defense to Administrative Agent and the Lenders. Except as provided in Section 2.03, after receipt, Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal ratably to the Lenders in accordance with their Pro Rata Shares and like funds relating to the payment of any other amount payable to any Lender to such Lender, in each case to be applied in accordance with the terms of this Agreement, provided that Administrative Agent will cause to be distributed all interest and fees received from or for the account of the Borrower not less than once each month and in any event promptly after receipt thereof. The Lenders and the Borrower hereby authorize Administrative Agent to, and Administrative Agent shall, from time to time, charge the Loan Account of the Borrower with any amount due and payable by the Borrower under any Loan Document. Each of the Lenders and the Borrower agrees that Administrative Agent shall have the right to make such charges whether or not any Default or Event of Default shall have occurred and be continuing or whether any of the conditions precedent in Section 4.03 have been satisfied. Any amount charged to the Loan Account of the Borrower shall be deemed a Loan hereunder made by the Lenders to the Borrower, funded by Administrative Agent on behalf of the Lenders and shall be payable on demand. The Lenders and the Borrower confirm that any charges which Administrative Agent may so make to the Loan Account of the Borrower as herein provided will be made as an accommodation to the Borrower and solely at Administrative Agent’s discretion. Whenever any payment to be made under any Loan Document shall be stated to be due on a day other than a Business Day, such payment

 

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shall be made on the next succeeding Business Day and such extension of time shall in such case be included in the computation of interest or fees, as the case may be. All computations of fees shall be made by Administrative Agent on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such fees are payable. Each determination by Administrative Agent of an interest rate or fees hereunder shall be conclusive and binding for all purposes in the absence of manifest error.

(b) Administrative Agent shall provide the Borrower, promptly after the end of each calendar month, a summary statement (in the form from time to time used by Administrative Agent) of the opening and closing daily balances in the Loan Account of the Borrower during such month, the amounts and dates of the Loans made to the Borrower during such month, the amounts and dates of all payments on account of the Loans during such month and the Loans to which such payments were applied, the amount of interest accrued on the Loans during such month, the amount of charges to the Loan Account, and the amount and nature of any charges to the Loan Account made during such month on account of fees, commissions, expenses and other Obligations. All entries on any such statement shall be presumed to be correct and shall be final and conclusive absent manifest error.

Section 3.03 Sharing of Payments, Etc. Except as provided in Section 2.03 hereof, if any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of any Obligation in excess of its ratable share of payments on account of similar obligations obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in such similar obligations held by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided , however , that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender’s ratable share (according to the proportion of (i) the amount of such Lender’s required repayment to (ii) the total amount so recovered from the purchasing Lender of any interest or other amount paid by the purchasing Lender in respect of the total amount so recovered). The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 3.03 may, to the fullest extent permitted by law, exercise all of its rights (including the Lender’s right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation.

Section 3.04 Apportionment of Payments . Subject to Section 2.03 hereof and to any written agreement among Administrative Agent or the Lenders:

(a) All payments of principal and interest in respect of the outstanding Loans, all payments of fees (other than any amounts payable under the Fee Letter, the audit and collateral monitoring fees provided for in Section 3.01, and any other amounts payable in respect of the Securities) and all other payments in respect of any other Obligations, shall be allocated by Administrative Agent among such of the Lenders as are entitled thereto, in proportion to their respective Pro Rata Shares or otherwise as provided

 

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herein or, in respect of payments not made on account of the Obligations as designated by the Person making payment when the payment is made and the Borrower shall not be liable for any error by Administrative Agent in such regard.

(b) After the occurrence and during the continuance of an Event of Default, Administrative Agent may, and upon the direction of the Required Lenders shall, apply all payments in respect of any Obligations and all proceeds of the Collateral, subject to the provisions of this Agreement, (i)  first , to pay the Obligations consisting of any fees, expense reimbursements, indemnities and other amounts then due to Administrative Agent until paid in full; (ii)  second , to pay interest due in respect of Administrative Agent Advances until paid in full; (iii)  third , to pay principal of Administrative Agent Advances until paid in full; (iv)  fourth , ratably to pay any fees and indemnities then due to the Lenders until paid in full; (v)  fifth , ratably to pay interest due in respect of the Loans until paid in full; (vi)  sixth , ratably to pay principal of the Loans until paid in full, and (vii)  seventh , to the ratable payment of all other Obligations then due and payable .

(c) For purposes of Section 3.04(b) (other than clause (vii) thereof), “paid in full” means with respect to any Obligations, payment of all amounts owing under the Loan Documents in respect of such Obligations, including fees, interest, default interest, interest on interest, expense reimbursements and indemnities, specifically including in each case any of the foregoing which would accrue after the commencement of any Insolvency Proceeding irrespective of whether a claim is allowable in such Insolvency Proceeding, except to the extent that default or overdue interest (but not any other interest) and fees, each arising from or related to a default, are disallowed in any Insolvency Proceeding; provided , however , that for purposes of such clause (vii), “paid in full” means with respect to any Obligations, payment of all amounts owing under the Loan Documents in respect of such Obligations, including fees, interest, default interest, interest on interest, expense reimbursements and indemnities, specifically including in each case any of the foregoing which would accrue after the commencement of any Insolvency Proceeding irrespective of whether a claim is allowable in such Insolvency Proceeding.

(d) In the event of a direct conflict between the priority provisions of this Section 3.04 and other provisions contained in any other Loan Document, it is the intention of the parties hereto that both such priority provisions in such documents shall be read together and construed, to the fullest extent possible, to be in concert with each other. In the event of any actual, irreconcilable conflict that cannot be resolved as aforesaid, the terms and provisions of this Section 3.04 shall control and govern.

Section 3.05 Increased Costs and Reduced Return .

(a) If any Lender or Administrative Agent shall have determined that the adoption or implementation of, or any change in, any law, rule, treaty or regulation, or any policy, guideline or directive of, or any change in, the interpretation or administration thereof by, any court, central bank or other administrative or Governmental Authority, or compliance by any Lender or Administrative Agent or any Person controlling any such

 

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Lender or Administrative Agent with any directive of, or guideline from, any central bank or other Governmental Authority or the introduction of, or change in, any accounting principles applicable to any Lender or Administrative Agent or any Person controlling any such Lender or Administrative Agent (in each case, whether or not having the force of law) (each, a “ Change in Law ”), shall (i) subject any Lender, Administrative Agent or any Person controlling any such Lender or Administrative Agent to any tax, duty or other charge with respect to this Agreement or the Loans made by such Lender or Administrative Agent or change the basis of taxation of payments to any Lender, Administrative Agent or any Person controlling any such Lender or Administrative Agent of any amounts payable hereunder (except for taxes on the overall net income of any Lender, Administrative Agent or any Person controlling any such Lender or Administrative Agent), (ii) impose, modify or deem applicable any reserve, special deposit or similar requirement against the Loans, or against assets of or held by, or deposits with or for the account of, or credit extended by, any Lender, Administrative Agent or any Person controlling any such Lender or Administrative Agent or (iii) impose on any Lender, Administrative Agent or any Person controlling any such Lender or Administrative Agent any other condition regarding this Agreement or the Loans, and the result of any event referred to in clauses (i), (ii) or (iii) above shall be to increase the cost to any Lender or Administrative Agent of making the Loans, or agreeing to make the Loans or to reduce any amount received or receivable by any Lender or Administrative Agent hereunder, then, upon demand by any such Lender or Administrative Agent, the Borrower shall pay to such Lender or Administrative Agent such additional amounts as will compensate such Lender or Administrative Agent for such increased costs or reductions in amount.

(b) If any Lender or Administrative Agent shall have determined that any Change in Law either (i) affects or would affect the amount of capital required or expected to be maintained by any Lender, Administrative Agent or any Person controlling such Lender or Administrative Agent and any Lender or Administrative Agent determines that the amount of such capital is increased as a direct or indirect consequence of the Loans made or maintained, any Lender’s, Administrative Agent’s or any such other controlling Person’s other obligations hereunder, or (ii) has or would have the effect of reducing the rate of return on any Lender’s or Administrative Agent’s or any such other controlling Person’s capital to a level below that which such Lender, Administrative Agent or such controlling Person could have achieved but for such circumstances as a consequence of the Loans made or maintained, or any agreement to make the Loans, or such Lender’s, Administrative Agent’s or such other controlling Person’s other obligations hereunder (in each case, taking into consideration, such Lender’s or Administrative Agent’s or such other controlling Person’s policies with respect to capital adequacy), then, upon demand by any Lender or Administrative Agent, the Borrower shall pay to such Lender or Administrative Agent from time to time such additional amounts as will compensate such Lender or Administrative Agent for such cost of maintaining such increased capital or such reduction in the rate of return on such Lender’s or Administrative Agent’s or such other controlling Person’s capital.

 

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