CONSENT, WAIVER AND FIFTH AMENDMENT TO
CREDIT AGREEMENT
THIS CONSENT, WAIVER AND FIFTH AMENDMENT TO CREDIT AGREEMENT (the
"Amendment") is dated as of January 30, 1997, and is by and between VIDEO
LOTTERY TECHNOLOGIES, INC., a Delaware corporation (the "Borrower") and FIRST
BANK NATIONAL ASSOCIATION, as administrative bank (the "Administrative Bank"),
and FIRST BANK NATIONAL ASSOCIATION as the sole Bank party (the "Bank") to that
certain Credit Agreement dated as of February 16, 1995, among the Borrower, the
Administrative Bank and such Bank, as amended by that certain Amendment No. 1 to
Credit Agreement and Waiver dated as of June 26, 1995, Second Amendment to
Credit Agreement dated as of March 4, 1996, Third Amendment to Credit Agreement
dated as of April 30, 1996 and Waiver and Fourth Amendment to Credit Agreement
dated August 19, 1996 (as so amended, the "Credit Agreement"). Capitalized terms
not otherwise expressly defined herein shall have the meanings set forth in the
Credit Agreement.
RECITALS
WHEREAS, the Borrower has requested that the Administrative Bank and the
Bank consent to the EDS Settlement, amend certain provisions of the Credit
Agreement and waive the Borrower's and its Subsidiaries' compliance with certain
provisions of the Credit Agreement; and
WHEREAS, the Administrative Bank and the Bank are willing to do so subject
to the terms and conditions of this Amendment.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I - CONSENT
The Administrative Bank and the Bank hereby consent to the consummation of
the EDS Settlement. This consent is limited to the EDS Settlement as set forth
in the EDS Settlement Documents in effect on the date of this Amendment.
ARTICLE II - AMENDMENTS TO THE CREDIT AGREEMENT
2.1 Amendments to Credit Agreement. The Credit Agreement is hereby amended
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as follows:
(a) Section 1.1 of the Credit Agreement is amended by respectively
amending the definitions of "Change of Control," "Permitted Redemptions,"
"Restricted
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Contracts," "Revolving Credit Commitment" and "Termination Date" to
read as follows:
"`Change of Control': The earlier to occur of: (a) a `Change
of Control' as defined in the EDS Note; or (b) the occurrence
after the date of this Agreement of any event where any Person or
Persons acting together which would constitute a `group' for
purposes of Section 13(d) (or any successor provision) of the
Securities Exchange Act of 1934, as it may be amended, and any
successor act thereto and the rules and regulations promulgated
thereunder (such Person or Persons together with its or their
Related Parties being a `Restricted Holder') shall beneficially
own at least 40% of the aggregate voting power of all classes of
the Borrower's stock entitled to vote generally in the election
of the Borrower's directors; or (b) any Restricted Holder shall
succeed in controlling the election of a majority of the
Borrower's board of directors or directing the Borrower's
management policies.
`Permitted Redemptions': Redemptions made by the Borrower of
its stock: (a) held by the Administrative Bank; or (b) pursuant
to the EDS Settlement Agreement in accordance with the terms of
EDS Settlement Documents in effect on the date of the Consent and
Fifth Amendment to Credit Agreement dated as of January 30, 1997
(the Fifth Amendment') among the Borrower, the Administrative
Bank and the Bank.
`Restricted Contract(s)': (a) The Material Contracts
identified on Schedule 1.1 (Restricted Contracts) attached to
that certain Waiver and Fourth Amendment to Credit Agreement
dated as of August 19, 1996 (the `Fourth Amendment') among the
Borrower, the Administrative Bank and the Banks and incorporated
into this Agreement by reference; (b) each other now existing or
hereafter arising Material Contract other than any Third-Party
Financed Material Contract in which the Administrative Bank has
released its lien in accordance with Section 25 of that certain
Security Agreement, Pledge and Assignment: Equipment, Inventory,
Securities and Intellectual Property dated as of the date of the
Fifth Amendment (the "Masterlink Security Agreement") made by the
Borrower and AWI in favor of the Administrative Bank and the
ratable benefit of the Banks; and (c) each now existing or
hereafter arising Technology License; provided, however, that:
(x) no such Material Contract or Technology License shall be a
Restricted Contract if the Lien in favor of the Administrative
Bank for itself and the ratable benefit of the Banks does not
attach to such Material Contract or Technology License in
accordance with the proviso clause set forth in ARTICLE II of the
AWI Security Agreement; and (y) the term of each Material
Contract shall be deemed to include any period when: (i) the
Restricted Contract Obligor has exercised its rights under such
Material Contract, through its right of usufruct or otherwise, to
employ the Borrower's or any of its Subsidiaries assets; and (ii)
the Bank has entered into
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a replacement, substitute or other contract with any Restricted
Contract Obligor following the occurrence of an Event of Default.
`Revolving Credit Commitment': The maximum unpaid principal
amount of Revolving Loans and Letter of Credit Obligations which
may from time to time be outstanding hereunder, being
$10,000,000.00 for Revolving Loans and $9,500,000.00 for Letter
of Credit Obligations, as the same may be reduced from time to
time pursuant to Section 4.3 and, as the context may require, the
agreement of the Banks to make Revolving Loans to the Borrower
and of First Bank to issue Letter of Credit for the account of
the Borrower and of each Bank to purchase Letter of Credit
Participations, in each case subject to the terms and conditions
of this Agreement.
`Termination Date': The date which is the earlier of: (a)
February 28, 1998; or (b) the date upon which the obligation of
the Banks to make Revolving Loans is terminated pursuant to
Section 10.2."
(b) Section 1.1 of the Credit Agreement is further amended by
adding the following definitions of "AWI Sale," "EDS/AWI Scheduled
Inventory," EDS/AWI Scheduled Inventory Net Proceeds," "EDS Bank
License Agreement," "EDS Deed of Trust," "EDS Deed of Trust Parity
Agreement," "EDS Intercreditor Agreement," "EDS Mandatory
Prepayments," "EDS Note," "EDS Obligations," "EDS Security Agreement,"
"EDS Settlement," "EDS Settlement Agreement," "EDS Settlement
Documents," "Fair Market Value," "Mandatory Prepayment Event," "Route
Business Subsidiary, "Route Business Subsidiary Sale, "Technology
License," "Third-Party Financed Material Contract," and "VLC Sale":
"`AWI Sale': Any sale of all or substantially all of the
assets of AWI or the Borrower's equity interest in AWI in any
transaction (or related series of transactions) permitted by
Section 9.2(d)(iii) or otherwise approved by the Administrative
Bank and the Banks. For purposes of this definition,
"substantially all" shall include, without limitation, any EDS
Mandatory Prepayment Event arising from the sale of all or
substantially all of AWI's assets or the Borrower's equity
interest in AWI.
`EDS/AWI Scheduled Inventory': The `Scheduled Equipment and
Inventory' described in the EDS Security Agreement in effect on
the date of the Fifth Amendment.
`EDS/AWI Scheduled Inventory Net Proceeds': The difference
between: (a) the gross proceeds received by the Borrower or AWI
from the sale, lease, assignment or other disposition of EDS/AWI
Scheduled Inventory, excluding the use of any such inventory in
accordance with any state on-line lottery contract and in a
manner that does not involve the transfer of title to
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such inventory, and including without limitation, an actual or
constructive loss of such property and any insurance payments in
respect thereof, an agreed or compromised loss of such property,
or the taking of any property under the power of eminent domain,
minus (b) such duties, transfer taxes, ad valorem taxes and
similar taxes imposed on and paid by the Borrower or AWI as a
consequence of such a sale or disposition of such property other
than taxes measured by the net income of the Borrower or AWI. For
purposes of this paragraph, if any portion of the consideration
received or receivable by VLT or AWI from such sale shall be in a
form other than cash, such consideration shall be valued at its
Fair Market Value.
'EDS Deed of Trust': The Deed of Trust, Assignment of Leases
and Rents, Security Agreement, Financing Statement and Fixture
Filing dated as of the date of the EDS Settlement Agreement in
favor of American Land Title Insurance Company, as trustee (the
`Trustee'), for the benefit of EDS covering the property lying in
Gallatin County, Montana and more particularly described on
Exhibit A attached thereto (the `Mortgaged Property').
`EDS Deed of Trust Parity Agreement': The Deed of Trust
Parity Agreement dated as of the date of the EDS Settlement
Agreement among VLT, EDS, and the Bank.
`EDS Intercreditor Agreement': The Intercreditor Agreement
dated as of the date of the EDS Settlement Agreement between EDS
and the Administrative Bank, which Intercreditor Agreement
includes the Bank Masterlink Protections Priority Addendum
attached thereto.
`EDS Mandatory Prepayments': The prepayments required to be
made by the Borrower and AWI upon the occurrence of a `Mandatory
Prepayment Event' as described in the EDS Note in effect on the
date of the Fifth Amendment.
`EDS Note': The $27,000,000 Promissory Note jointly and
severally made by the Borrower and AWI payable to EDS together
with each renewal, replacement and substitute note therefor.
`EDS Obligations': The `Obligations' as defined in the EDS
Security Agreement.
`EDS Security Agreement': The Security Agreement, Pledge and
Assignment: Equipment, Inventory, Securities and Intellectual
Property dated as of the date of the EDS Settlement Agreement
pursuant to which the Borrower and certain of its Subsidiaries
have granted to EDS a Lien in the
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collateral described on Exhibit A attached thereto (the `EDS
Security Agreement Collateral').
"`EDS Settlement': The transactions contemplated by the EDS
Settlement Agreement and the other EDS Settlement Documents.
`EDS Settlement Agreement': The Master Settlement Agreement
dated as of January 30, 1997 among the Borrower and certain of
its Subsidiaries, on the one hand, and EDS and certain of its
subsidiaries, on the other.
`EDS Settlement Documents': The EDS Settlement Agreement,
the EDS Note, the EDS Deed of Trust, the EDS Security Agreement
and each other document executed and/or delivered by the Borrower
or any of its Subsidiaries as a condition to consummating the EDS
Settlement, in each as amended, modified, supplemented or
restated from time to time as permitted by Section 9.21.
`Fair Market Value': The Fair Market Value of any non-cash
consideration from the sale of EDS/AWI Scheduled Inventory shall
be determined as follows:
(a) any debt instrument shall be valued at its face amount;
(b) any equity security for which there is an established
public market shall be valued at the established
trading price for such security on the date on which it
is deliverable to (or upon the order of) the Borrower
or AWI;
(c) any other non-cash consideration shall have the value
established by an appraisal prepared by an appraiser
selected jointly by VLT, AWI, EDS and the
Administrative Bank at least 45 days prior to the date
on which such consideration is deliverable to the
Borrower or AWI, or, if the Borrower, AWI, EDS and the
Administrative Bank do not agree on an appraiser, by a
panel of four appraisers, one of which shall be
selected by the Borrower and AWI, one of which shall be
selected by EDS, one of which shall be selected by the
Administrative Bank and the fourth of which shall be
selected by the three appraisers previously selected.
Such appraisers must have experience in the appraisal
of property of the same type as the subject
consideration, and each appraiser shall submit to the
Borrower, AWI,
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EDS and the Administrative Bank a written estimate of value. If there
is more than one written estimate and such estimates differ, the Fair
Market Value shall be the arithmetical average of all such estimates.
The Borrower shall use, and shall cause AWI to use, their best efforts
to provide to all appraisers such access to records of, and access to
the physical consideration, in order to permit the development of
those estimates. The cost of such appraisals shall be borne equally by
the Borrower and AWI as an entity, EDS and the Administrative Bank.
`Mandatory Prepayment Event': The occurrence of any AWI Sale, any
VLC Sale, any sale of any EDS/AWI Scheduled Inventory or any receipt
by the Borrower or any of its Subsidiaries of a payment or payments
under a Technology License (or similar technology transfer) of any
part of the `Masterlink Protections' (as defined in the Masterlink
Security Agreement referred to below) (the `Masterlink Protections')
for its use in operating on-line lottery systems anywhere in the world
where such payment, when aggregated with all other prior payments
under such Technology License exceed $7,500,000 for a given country.
`Route Business Subsidiary': Raven's D & R Music, Inc.
(`Raven's'), Automatic Music Service of Xxxxxxxx, Inc. (`Automatic
Music') and Automation First, Inc. (`Automation').
`Route Business Subsidiary Sale': Any sale of all or
substantially all of the assets of any Route Business Subsidiary or
the Borrower's equity interest in any Route Business Subsidiary in any
transaction (or related series of transactions) approved by the
Administrative Bank and the Banks.
`Technology License': Any license (or similar technology
transfer) between the Borrower or any of its Subsidiaries and a third
party pursuant to which the Borrower or its Subsidiary permits its
intellectual property to be used by such third party in connection
with the operation of video lottery, on-line lottery or computerized
wagering systems.
`Third-Party Financed Material Contract': Any Material Contract
entered into by the Borrower or any of its Subsidiaries after the date
of the Fifth Amendment with a state lottery where: (a) the Borrower's
or its Subsidiaries' performance of its respective initial obligations
under such Material Contract require Consolidated Capital Expenditures
of at least $5,000,000.00; and (b) another Person (other than one of
the Borrower's Subsidiaries or Related Parties) finances (or enters
into a binding commitment to finance) at least 50% of such
Consolidated Capital Expenditures; provided,
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however, that any Indebtedness must be permitted under Section 9.10(d)
at the time incurred.
`VLC Sale': Any sale of all or substantially all of the assets of
VLC or the Borrower's equity interest in VLC in any transaction (or
related series of transactions) permitted by Section 9.2(d)(iii) or
otherwise approved by the Administrative Bank and the Banks. For
purposes of this definition, `substantially all' shall include,
without limitation, any EDS Mandatory Prepayment Event arising from
the sale of all or substantially all of VLC's assets or the Borrower's
equity interest in VLC."
(c) Section 2.7 of the Credit Agreement is amended by adding the
following new subsection "(j)":
"(j) Cash Collateral Account. The Borrower and First Bank agree
that, so long as no Default or Event of Default has occurred and is
continuing:
(i) if any Letter of Credit issued by First Bank for the
account of CNA Surety Companies (or any beneficiary on any
replacement or substitute Letter of Credit) to secure AWI's
performance of a CNA Material Contract (the `CNA Letter(s) of
Credit') is cancelled or reduced (other than pursuant to a draw
thereon), then the amount of such cancellation or reduction shall
be deemed to have cancelled or reduced, on a dollar for dollar
basis, the CNA Letters of Credit secured by the Cash Collateral
Account established by the Letter of Credit Applications for the
CNA Letters of Credit;
(ii) Contemporaneously with such cancellation or reduction,
the Borrower authorizes the Administrative Bank to prepay the
Term Loans in accordance with Section 4.2(d)(i) by the amount of
such cancellation or reduction."
(d) Sections 3.1(a) and (b) of the Credit Agreement are respectively
amended in their entirety to read as follows:
"Section 3.1 Interest.
(a) Revolving Loans.
(i) Subject to the provisions of Section 3.1(a)(ii),
the Borrower agrees to pay interest on the outstanding
principal amount of each Revolving Loan from the date of
such Revolving Loan until the Maturity thereof:
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(A) With respect to each Reference Rate
Loan Unit comprising a portion of such Revolving
Loan, at a fluctuating rate per annum equal at all
times to: (1) the Reference Rate through August
31, 1997; or (2) the sum of the Reference Rate
plus one percent (1.00%) per annum thereafter; and
(B) With respect to each Eurodollar Rate
Loan Unit comprising a portion of such Revolving
Loan, at a rate per annum equal at all times
during the Interest Period relating to such
Eurodollar Rate Loan Unit to the sum of the
Eurodollar Rate (Reserve Adjusted) in effect for
such Interest Period plus: (1) two and one-quarter
percent (2.25%) per annum through August 31, 1997;
or (2) three and one-quarter percent (3.25%) per
annum thereafter.
(ii) Notwithstanding the provisions of Section
3.1(a)(i), at all times after the occurrence and during the
continuance of any Event of Default, the Borrower agrees to
pay interest on the outstanding principal amount of each
Revolving Loan from the date on which the Administrative
Bank notifies the Borrower of such Event of Default at a
rate per annum at all times equal to the sum of the
Reference Rate plus: (A) two percent (2.0%) per annum
through August 31, 1997; or (B) three percent (3.0%) per
annum thereafter.
(b) Term Loans.
(i) Subject to the provisions of Section 3.1(b)(ii),
the Borrower agrees to pay interest on the outstanding
principal amount of each Term Loan from the date of such
Term Loan until the Maturity thereof as follows:
(A) with respect to each Reference Rate
Loan Unit comprising a portion of such Term Loan,
at a fluctuating rate per annum equal at all times
to: (1) the Reference Rate through August 31,
1997; or (2) the sum of the Reference Rate plus
one percent (1.00%) per annum thereafter;
(B) with respect to each Eurodollar Rate
Loan Unit comprising a portion of such Term Loan,
at a rate per annum equal at all times during the
Interest Period relating to such Eurodollar Rate
Loan Unit to the sum of the Eurodollar Rate
(Reserve Adjusted) in effect for such Interest
Period plus: (1) two and one-quarter percent
(2.25%) per annum through
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August 31, 1997; or (2) three and one-quarter
percent (3.25%) per annum thereafter.
(ii) Notwithstanding the provisions of Section
3.1(b)(i), at all times after the occurrence and during the
continuance of any Event of Default, the Borrower agrees to
pay interest on the outstanding principal balance of each
Term Loan from the date on which the Administrative Bank
notifies the Borrower of such Event of Default at a rate per
annum at all times equal to the sum of the Reference Rate
plus: (A) two percent (2.0%) per annum through August 31,
1997; or (B) three percent (3.0%) per annum thereafter."
(e) Section 4.2 of the Credit Agreement is amended by: (i) relettering
subsection "(d)" thereof as subsection "(f)"; (ii) adding the following new
subsections "(d)" and "(e)"; and (iii) amending newly relettered subsection
"(f)" to read as set forth below:
"(d) Partial Mandatory Prepayment of all Loans. The Borrower
shall prepay the Loans as follows:
(i) Contemporaneously with the cancellation or reduction
(other than by a drawing thereon) of any CNA Letter of Credit,
the Borrower shall prepay the Loans by the amount of such
cancellation or reduction.
(ii) Contemporaneously with the Borrower's or any of its
Subsidiaries' receipt of any cash proceeds from the sale, lease,
assignment or other disposition of EDS/AWI Scheduled Inventory of
the Borrower or AWI, excluding the use of any such inventory in
accordance with any Material Contract and in a manner that does
not involve the transfer of title to such EDS/AWI Scheduled
Inventory, and including without limitation, an actual or
constructive loss of such property and any insurance payments in
respect thereof, an agreed or compromised loss of such property,
or the taking of any property under the power of eminent domain
of any EDS/AWI Scheduled Inventory, the Borrower shall use such
cash proceeds to prepay the Loans by an amount which, when
aggregated with all prior payments under subsection (ii), does
not exceed 30% of the amount of the EDS/AWI Scheduled Inventory
Net Proceeds received by such Person; provided, however, that:
(A) if non-cash consideration is received for any
EDS/AWI Scheduled Inventory, then the percentage applicable
to each cash payment (including, without limitation, any
down payment) received by the Borrower or AWI shall be
increased
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to 50% until such time as the Borrower
shall have prepaid the required 30% of
EDS/AWI Scheduled Inventory Net
Proceeds;
(B) if the transaction (or related series of
transactions) combines the sale of EDS/AWI Scheduled
Inventory and a Technology License, then the required
prepayment from received cash proceeds under this subsection
(ii) shall be the greatest of:
(1) 30% (or 50% if subsection (A) of
this proviso clause is operative) of EDS/AWI
Scheduled Inventory Net Proceeds if the
consideration for the sale of the EDS/AWI
Scheduled Inventory is separately stated and is
greater than $500.00 per Excalibur or Ovation
computer terminal sold in such transaction;
(2) $250.00 times the number of
Excalibur or Ovation computer terminals sold in
such combined transaction; or
(3) the amount of the EDS Mandatory
Prepayment required to be made to EDS with respect
to such transaction (or related series of
transactions).
(C) the required maximum prepayment percentage of 30%
of EDS/AWI Scheduled Inventory Net Proceeds shall be
increased to 60% (or 100% if subsection (A) of this proviso
clause is operative) upon payment in full of the EDS
Obligations.
(iii) Contemporaneously with the Borrower's or any of its
Subsidiaries' receipt of cash proceeds from any Route Business
Subsidiary Sale, the Borrower shall prepay the Term Loans by the
following amounts:
(A) $1,000,000.00 if all of the Route Business
Subsidiaries are sold in any transaction (or related series
of transactions);
(B) $ 500,000.00 if Raven's is one of the Route
Business Subsidiaries sold in any such Route Business
Subsidiary Sale which does not involve all of the Route
Business Subsidiaries;
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(C) $ 400,000.00 if Automatic Music is one of the Route
Business Subsidiaries sold in any such Route Business
Subsidiary Sale which does not involve all of the Route
Business Subsidiaries; and/or
(D) $ 100,000.00 if Automation First is one of the
Route Business Subsidiaries sold in any such Route Business
Subsidiary Sale which does not involve all of the Route
Business Subsidiaries.
(iv) Contemporaneously with the Borrower's or any of its
Subsidiaries' receipt of a payment or payments under a Technology
License of any part of the Masterlink Protections for its use in
operating on-line lottery systems anywhere in the world, the
Borrowers shall prepay the Loans by an amount equal to 25% of the
portion of such payments which, when aggregated with all other
prior payments under such Technology License, exceed $7,500,000
for a given country.
(v) The prepayments on the Loans required by this Section
shall be first equally applied against the principal balance of
each Term Loan or, if the Term Loans have been paid in full,
against the Revolving Loans.
(e) Full Mandatory Prepayment of all Loans. The Borrower shall
prepay all Obligations contemporaneously with the closing of any AWI
Sale or VLC Sale. The prepayment required by this Section shall
include, without limitation, the aggregate face amount of all Letters
of Credit then outstanding. Amounts paid by the Borrower with respect
to the Letters of Credit shall be made directly to an interest-bearing
collateral account maintained at First Bank for application to the
Borrower's reimbursement obligations under Section 2.7(d) as payments
are made on the Letters of Credit, with the balance, if any, to be
applied to the other Obligations.
(f) Application of Prepayments. Each prepayment of any Term Loan
shall be applied to the unpaid installments of such Loan in the
inverse order of their maturities except that prepayments of the Term
Loans pursuant to subsection (d) above shall be applied against unpaid
installments of such Loan in the order of their maturities. Subject to
the immediately preceding sentence, the Banks shall apply prepayments
first to Reference Rate Loan Units, then to Eurodollar Rate Loan Units
having an Interest Period ending on such day of prepayment and then to
other Eurodollar Rate Loan Units."
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(f) Section 4.3 of the Credit Agreement is amended in its entirety to
read as follows:
"Section 4.3 Mandatory Reduction of Revolving Credit Commitment.
The Revolving Credit Commitment shall be permanently reduced by the
amount of: (a) each mandatory prepayment on the Revolving Loans
pursuant to Section 4.2(d) or (e) and (b) each reduction in the Letter
of Credit Obligations occurring after August 19, 1996 as a result of a
reduction in the amount available to be drawn on the Letters of Credit
which does not result from a drawing thereon. The reduction in the
Revolving Credit Commitment shall be applied to the Individual
Revolving Credit Commitments of the Banks pro rata in accordance with
their Percentages."
(g) ARTICLE VIII is further amending by adding the following new
Section 8.14:
"Section 8.14 Masterlink Protections Co-operation. If, at any
Quarterly Measurement Date, the Borrower's Consolidated Cash Flow
Leverage Ratio exceeds 3.5 to 1.0 or Consolidated Debt Service
Coverage Ratio is less than 2.0 to 1.0, the Borrower, immediately, but
in no event more than ten (10) Business Days' after the Administrative
Bank requests that the Borrower deposit copies of all software
programs necessary or convenient to the Borrower's or any of its
Subsidiaries' performance of a Restricted Contract into escrow, shall
execute and deliver, and shall cause each of its relevant Subsidiaries
to execute and deliver, an escrow agreement substantially similar in
terms to the "Source Code Escrow Account" constituting one of the EDS
Settlement Documents and deposit the required software into the escrow
created thereby."
(h) Section 9.2 of the Credit Agreement is amended in its entirety to
read as follows:
"Section 9.2 Sale of Assets. Except for Permitted Liens, sell,
transfer, lease, or otherwise convey, by license or otherwise: (a) any
Consolidated Current Asset or any EDS/AWI Scheduled Inventory except
in connection with: (i) sales of equipment or inventory permitted by
subsection (d)(i) below; (ii) sales of long-term notes and contracts
receivables permitted by subsection (d)(ii) below; or (iii) any AWI
Sale or VLC Sale or any Route Business Subsidiary Sale where the
Borrower prepays the Obligations in accordance with Section
4.2(d)(iii) or (e) as the case may be; (b) any of the capital stock of
AWI, VLC or any Route Business Subsidiary except in connection with an
AWI Sale, VLC Sale or Route Business Subsidiary Sale, as the case may
be, and where the Borrower prepays the Obligations in
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accordance with Section 4.2(d)(iii) or (e), as the case may be; (c)
any of its property, not constituting Collateral, necessary or
convenient to the performance of any Restricted Contract unless such
Person reserves for itself all rights necessary to perform such
Restricted Contract; or (d) all or any substantial part of its other
assets except for: (i) sales of inventory or equipment in the ordinary
course of business which shall include sales of EDS/AWI Scheduled
Inventory where such sale is to a non-affiliate of the Borrower and
the Borrower prepays the Loans in accordance with Section 4.2(d); (ii)
sales of notes, lease receivables and contracts receivables in the
ordinary course of business so long as the aggregate amount of the
contingent liabilities of any or all of the Borrower or any of its
Subsidiaries incurred in connection with such sales does not exceed
$20,000,000.00; (iii) any AWI Sale or VLC Sale where the Borrower
prepays the Obligations in accordance with Section 4.2(e); (iv) any
Route Business Subsidiary Sale where Borrower prepays the Loans in
accordance with Section 4.2(d)(iii); (v) licenses of any intellectual
property necessary or convenient to VLC's or UWS' respective
businesses of providing video gaming or computerized wagering systems
or services (or licensing its respective technologies therefor)
pursuant to non-exclusive Technology Licenses to a non-affiliate of
the Borrower that, in the case of VLC, generates revenues subject to
the Administrative Bank's security interest under the VLC Security
Agreement; (vi) sales of up to $20,000,000.00 of assets by NSTC to
non-affiliates of the Borrower; or (vii) other sales or dispositions
of assets, not constituting Collateral or otherwise restricted by this
Section 9.2, so long as the aggregate fair market value of the assets
involved in all such transactions during any of the Borrower's fiscal
years does not exceed $5,000,000.00; or"
(i) Section 9.10(d) of the Credit Agreement is amended in its entirety
to read as follows:
"(d) Other Indebtedness incurred by the Borrower, AWI, VLC, UWS
or NSTC so long as: (i) no Default or Event of Default has occurred
and is continuing at the time of the incurrence of such Indebtedness;
(ii) such incurrence would not cause the Pro Forma Consolidated Cash
Flow Leverage Ratio to exceed 2.75 to 1.0 or the Pro Forma
Consolidated Debt Service Coverage Ratio to be less than 1.75 to 1.0
as of the date on which such Indebtedness is proposed to be incurred;
(iii) the Indebtedness incurred by AWI is for the purpose of financing
the AWI's Consolidated Capital Expenditures with respect to a
Third-Party Financed Material Contract; (iv) the Indebtedness incurred
by all or any of the Borrower, VLC or UWS does not exceed the
aggregate original principal amount $15,000,000.00; and (v) the
aggregate original principal amount of any Indebtedness incurred by
NSTC does not exceed $15,000,000.00;"
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(j) Section 9.10 of the Credit Agreement is further amended by
respectively relettering subsections "(e)" and "(f)" as "(f)" and "(g)" and
by adding the following new subsection "(e)":
"(e) Indebtedness evidenced by the EDS Note; provided, however,
that the amount of such permitted Indebtedness shall be reduced by
principal payments thereon;"
(k) Section 9.11 of the Credit Agreement is amended by respectively
relettering subsections "(j)" and "(k)" as "(l)" and "(m)" and by adding
the following new subsections "(j)" and "(k)":
"(j) Liens granted by AWI securing only AWI's Indebtedness
permitted by Section 9.10(d); provided, however, that such Lien
attaches only to the relevant Third-Party Financed Material Contract,
any software necessary for AWI's performance of such Third-Party
Financed Material Contract, the equipment and inventory required to be
provided by AWI pursuant to such Third-Party Financed Material
Contract and the proceeds of any thereof and shall secure only the
Indebtedness incurred to finance AWI's Consolidated Capital
Expenditures related to such Third-Party Financed Material Contract;
(k) Liens granted by the Borrower, AWI, VLC and UWS pursuant to
the EDS Settlement Documents in effect on the date of the Fifth
Amendment securing the Indebtedness evidenced by the EDS Note
permitted by Section 9.10(e);"
(l) Newly relettered Section 9.11(l) of the Credit Agreement is
amended in its entirety to read as follows:
"(l) Rights in favor of a party (other than the Borrower or any
of its Subsidiaries or Related Parties) under a Material Contract or a
Technology License";
(m) Section 9.15 of the Credit Agreement is amended in its entirety to
read as follows:
"Section 9.15 Restricted Payments. Purchase or redeem or
otherwise acquire for value any shares of the Borrower's or any of its
Subsidiaries' stock, declare or pay any dividends thereon (other than
stock dividends), make any distribution on, or payment on account of
the purchase, redemption, defeasance or other acquisition or
retirement for value of, any shares of the Borrower's stock or set
aside any funds for any such purpose, except that: (a) any of the
Borrower's direct or indirect wholly-owned Subsidiaries may pay
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dividends to its corporate parent; (b) the Borrower and any of its
Subsidiaries may consummate any transaction permitted by Section 9.1;
or (c) the Borrower may make the Permitted Redemptions so long as any
payment to EDS pursuant to the EDS Settlement Document are made only:
(i) in accordance with the schedule established by the EDS Note in
effect on the date of the Fifth Amendment; or (ii) as a result of the
occurrence of an EDS Mandatory Prepayment Event where the amount of
any such mandatory prepayment does not exceed the amount of the
prepayment required by the terms of the EDS Note in effect on the date
of the Fifth Amendment."
(n) Section 9.17 of the Credit Agreement is amended in its entirety to
read as follows:
"Section 9.17 Consolidated Net Worth. Permit, as of any Quarterly
Measurement Date, its Consolidated Net Worth to be less than the sum
of $81,400,000.00 plus 100% of the cumulative Consolidated Net Income
(without any deduction for losses) earned on and after January 1,
1996; minus the lesser of: (a) $20,000,000.00; or (b) the excess of
the actual amount of charges taken in the four consecutive fiscal
quarter period commencing with the second quarter of the Borrower's
1996 fiscal year and ending with the first quarter of the Borrower's
1997 fiscal over the actual amount of gain realized upon the
consummation of the EDS Settlement in such first quarter."
(o) Section 9.18 of the Credit Agreement is amended in its entirety to
read as follows:
"Section 9.18 Cash Flow Leverage Ratio. Permit, as of any
Quarterly Measurement Date, the Consolidated Cash Flow Leverage Ratio
to be greater than 2.75 to 1.0."
(p) Section 9.19 of the Credit Agreement is amended in its entirety to
read as follows:
"Section 9.19 Debt Service Coverage Ratio. Permit, as of any
Quarterly Measurement Date, the Consolidated Debt Service Coverage
Ratio to be less than 1.75 to 1.0."
(q) ARTICLE IX of the Credit Agreement is further amended by adding
the following new Section 9.21:
"Section 9.21 EDS Settlement. (a) Make any payment on the EDS
Note or any other EDS Settlement Document except in accordance with
the terms thereof in effect on the date of the Fifth Amendment; or (b)
amend or modify any EDS Settlement Document."
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(r) Section 10.1(k) of the Credit Agreement is amended in its entirety
to read as follows:
"(k) (i) Any "Event of Default" (howsoever defined) shall occur
under any EDS Settlement Document; or (ii) the maturity of any
Indebtedness of any Loan Party (other than Indebtedness under this
Agreement or the other Loan Documents or the Indebtedness under the
EDS Note or any other EDS Settlement Document) in the aggregate amount
of more than $1,000,000.00 for any or all of the Loan Parties shall be
accelerated, or any Loan Party shall fail to pay any such Indebtedness
when due or, in the case of such Indebtedness payable on demand, when
demanded, or any event shall occur or condition shall exist and shall
have the effect of causing the holder of any such Indebtedness or any
trustee or other Person acting on behalf of such holder to cause such
Indebtedness to become due prior to its stated maturity or to realize
upon any collateral given as security therefor; or."
(s) Section 10.1(n) of the Credit Agreement is amended in its entirety
to read as follows:
"(n) Payment (by set-off or otherwise) of liquidated damages
under any Material Contract in excess of $2,000,000.00 for any single
occurrence, or $4,000,000.00 in the aggregate for all occurrences in
any fiscal year; or Contract, unless such liquidated damages are: (i)
covered by insurance and the insurer has agreed that its insurance
policy insures the payment of the relevant liquidated damages; or (ii)
being contested in good faith by appropriate proceedings; or."
(t) Section 10.1 of the Credit Agreement is further amended by
substituting a period for the semi-colon appearing at the end of Section
10.1(n) and by deleting the remainder of Section 10.1 following such
period.
(u) Exhibit H to the Credit Agreement is amended to conform to Exhibit
H (Amended 1/97) attached hereto.
2.2 Construction. All references in the Credit Agreement to "this
------------
Agreement," "herein" and similar references shall be deemed to refer to the
Credit Agreement as amended by this Amendment.
ARTICLE III - REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Amendment and to make and maintain
the Loans under the Credit Agreement as amended hereby, the Borrower hereby
warrants and represents to the Lender that:
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(a) The execution, delivery and performance by the Borrower of this
Amendment and any other documents to which the Borrower is a party have
been duly authorized by all necessary corporate or partnership action, do
not require any approval or consent of, or any registration, qualification
or filing with, any government agency or authority or any approval or
consent of any other person (including, without limitation, any stockholder
or partner), do not and will not conflict with, result in any violation of
or constitute any default under, any provision of the Borrower's articles
of incorporation or bylaws, any agreement binding on or applicable to the
Borrower or any of its property, or any law or governmental regulation or
court decree or order, binding upon or applicable to the Borrower or of any
of its property and will not result in the creation or imposition of any
security interest or other lien or encumbrance in or on any of its property
pursuant to the provisions of any agreement applicable to the Borrower or
any of its property except pursuant to the documents required to be
executed and delivered pursuant hereto;
(b) The Credit Agreement as amended by this Amendment and the other
Loan Documents to which any Loan Party is a party are the legal, valid and
binding obligations of each Loan Party which is a party thereto and are
enforceable in accordance with their respective terms, subject only to
bankruptcy, insolvency, reorganization, moratorium or similar laws, rulings
or decisions at the time in effect affecting the enforceability of rights
of creditors generally and to general equitable principles which may limit
the right to obtain equitable remedies;
(c) The VLT Shares, upon delivery to the Administrative Bank pursuant
to Section 4.3(l) have been duly authorized, validly issued, fully paid and
non-assessable. The VLT Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act").
ARTICLE IV - CONDITIONS AND EFFECTIVENESS
This Amendment shall become effective on the date first set forth above,
provided, however, that the effectiveness of this Amendment is subject to the
satisfaction of each of the following conditions:
4.1 Before and after giving effect to this Amendment, the
representations and warranties in ARTICLE VII of the Credit Agreement shall
be true and correct as though made on the date hereof except for changes
that are permitted by the terms of the Credit Agreement and for changes
that are required by the terms of this Amendment. The execution by the
Borrower of this Amendment shall be deemed a representation that the
Borrower has complied with the foregoing condition.
4.2 Before and after giving effect to this Amendment, no Default or no
Event of Default shall have occurred and be continuing under the Credit
Agreement except for
17
those expressly waived by the terms hereof. The execution by the Borrower
of this Amendment shall be deemed a representation that the Borrower has
complied with the foregoing condition.
4.3 The Administrative Bank shall have received a duly executed copy
of this Amendment and the following documents or other items appropriately
completed and duly executed by the Borrower and the other Loan Parties
where appropriate:
(a) a Security Agreement, Pledge and Assignment: Equipment,
Inventory Securities and Intellectual Property (the "IP Security
Agreement") in the form provided by the Administrative Bank
appropriately completed and duly executed by the Borrower, AWI, VLC
and UWS together with UCC-1 Financing Statements in a form acceptable
to the Banks appropriately completed and duly executed by each such
Loan Party;
(b) an Intercreditor Agreement in a form acceptable to the
Administrative Bank, in its sole discretion, appropriately completed
and duly executed by EDS, the Borrower, AWI, VLC and UWS;
(c) a Deed of Trust, Assignment of Leases and Rents, Security
Agreement, Financing Statement and Fixture Filing (the "Deed of
Trust") covering the Borrower's Bozeman, MT main office facility in
the form provided by the Administrative Bank appropriately completed
and duly executed by the Borrower together with UCC-1 Financing
Statements in a form acceptable to the Administrative Bank
appropriately completed and duly executed by the Borrower;
(d) a Deed of Trust Parity Agreement in a form acceptable to the
Administrative Bank, in its sole discretion, appropriately completed
and duly executed by EDS, the Borrower, the Borrower and the Trustee;
(e) a Consent in the form provided by the Administrative Bank
appropriately completed and duly executed by each Guarantor;
(f) recent UCC searches from the filing offices in all states
required by the Banks which reflect that no Person holds a Lien in any
of the Borrower's or any of its Subsidiaries' assets covered by the IP
Security Agreement or the Deed of Trust other than Permitted Liens;
(g) a certified copy of Resolutions of the Board of Directors of
each Loan Party authorizing or ratifying the execution, delivery and
performance of this Amendment and any other documents provided for in
this Amendment;
(h) a certificate by the Secretary or any Assistant Secretary of
each Loan Party certifying the names of the officers of such Loan
Party authorized to
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sign this Amendment and any other documents provided for in this
Amendment together with a sample of the true signature of such
officers;
(i) an Opinion of Counsel to the Loan Parties in form and
substance satisfactory to the Administrative Bank and the Bank;
(j) an amendment fee of $50,000.00 in immediately available
funds;
(k) 35,000 shares of the Borrower's common stock (the "VLT
Shares") issued in the name of First Bank National Association;
(l) a Stock Agreement in a form acceptable to the Administrative
Bank, in its sole discretion, appropriately completed and duly
executed by the Borrower; and
(m) such other approvals, opinions or documents as the
Administrative Bank or the Bank may reasonably request.
ARTICLE V - GENERAL
5.1 Expenses. The Borrower agrees to reimburse the Administrative Bank and
--------
each Bank upon demand for all reasonable expenses, including reasonable fees of
attorneys and legal expenses incurred by the Administrative Bank or such Bank in
the preparation, negotiation and execution of this Amendment and any other
document required to be furnished herewith, and in enforcing the obligations of
the Borrower hereunder, and to pay and save the Administrative Bank and the
Banks harmless from all liability for, any stamp or other taxes which may be
payable with respect to the execution or delivery of this Amendment, which
obligations of the Borrower shall survive any termination of the Credit
Agreement; provided, however, that the Borrower's obligations to reimburse the
Administrative Bank and the Bank for its attorney's fees and legal expenses
shall be limited to the sum of: (a) $20,000.00; (b) plus out-of pocket expenses;
plus (c) any amount of attorney's fees incurred in connection with the
preparation, and negotiation of the Intercreditor Agreement, the Deed of Trust
Parity Agreement and the Bank License Agreement in excess of $5,000.00.
5.2 Counterparts. This Amendment may be executed in as many counterparts as
------------
may be deemed necessary or convenient, and by the different parties hereto on
separate counterparts, each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
instrument.
5.3 Severability. Any provision of this Amendment which is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.
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5.4 Law. This Amendment shall be a contract made under the laws of the
---
State of Minnesota, which laws shall govern all the rights and duties hereunder.
5.5 Successors: Enforceability. This Amendment shall be binding upon the
--------------------------
Borrower , the Administrative Bank and each Bank and their respective successors
and assigns, and shall inure to the benefit of the Borrower, the Administrative
Bank and each Bank and the successors and assigns of the Administrative Bank and
each Bank. Except as hereby amended, the Credit Agreement shall remain in full
force and effect and is hereby ratified and confirmed in all respects.
5.6 Recitals. The recitals hereto are incorporated herein by reference and
--------
constitute an integral part of this Amendment.
5.7 Acknowledgement and Release. In order to induce the Administrative Bank
---------------------------
and the Banks to enter into this Amendment, the Borrower represents and warrants
to the Administrative Bank and the Bank that no events have taken place and no
circumstances exist at the date hereof which would give the Borrower the right
to assert a defense, offset or counterclaim to any claim by the Administrative
Bank or the Bank for payment of the Obligations.
5.8 Investment Representation. The Administrative Bank represents and
-------------------------
warrants to the Borrower that the Administrative Bank is (a) an "accredited
investor" as defined in Rule 501 promulgated under the Securities Act, and (b)
acquiring the VLT Shares for investment and not with a view to selling or
otherwise distributing the VLT Shares. The Administrative Bank acknowledges that
the VLT Shares have not been registered under the Securities Act.
ARTICLE VI - WAIVER
The Administrative Bank and the Bank hereby waive:
(a) the Borrower's compliance with Section 4.2(b)(iii) of the Credit
Agreement for calendar year 1997; and
(b) any Event of Default that would arise under Section 10.1(m) of the
Credit Agreement because of the cancellation, termination or expiration of
the Material Contract with Florida which expired on June 30, 1996 or of the
Material Contract with Minnesota which will expire on August 13, 1997;
(c) any Event of Default that would arise under Section 10.1(n) of the
Credit Agreement because of the imposition of liquidated damages under the
Minnesota Contract in excess of $2,000,000.00 for any single occurrence or
$4,000,000.00 in the aggregate for all occurrences in any fiscal year so
long as the amount of liquidated damages, net of recovered insurance
proceeds, does not exceed $3,400,000.00.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
VIDEO LOTTERY TECHNOLOGIES, INC., a
Delaware corporation
By: /S/ XXXX XXXXXXXXXX
----------------------------------------
Title: General Counsel & Assistant Secretary
FIRST BANK NATIONAL ASSOCIATION, AS
ADMINISTRATIVE BANK AND A BANK
By /S/XXXXX X. XXXXXX
---------------------------------------
Its Assistant Vice President
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