Table of Contents		Page
ARTICLE I.	Defined Terms; Etc.	1
SECTION 1.01.	Defined Terms	1
SECTION 1.02.	Rules of Construction	11
SECTION 1.03.	Computation of Interest, Fees, Etc	11
ARTICLE II.	CREDIT FACILITIES	11
SECTION 2.01.	Term Loans	11
SECTION 2.02.	Amortization and Maturity Date	12
SECTION 2.03.	Interest and Fees	12
SECTION 2.04.	Change in Law	12
SECTION 2.05.	Voluntary Prepayments	12
SECTION 2.06.	Mandatory Prepayments	12
SECTION 2.07.	Application of Payments	13
SECTION 2.08.	Payment of Obligations; Method and Place of Payment	13
SECTION 2.09.	Prepayment Premium	13
ARTICLE III.	REPRESENTATIONS AND WARRANTIES	14
SECTION 3.01.	Status	14
SECTION 3.02.	Power and Authority	14
SECTION 3.03.	No Violation	14
SECTION 3.04.	Litigation, Labor Controversies, etc	15
SECTION 3.05.	Use of Proceeds; Margin Stock; Investment Company Act	15
SECTION 3.06.	Governmental Approvals	15
SECTION 3.07.	Accuracy of Information	15
SECTION 3.08.	Financial Condition; Financial Statements	16
SECTION 3.09.	Tax Returns and Payments	16
SECTION 3.10.	Subsidiaries	16
SECTION 3.11.	Ownership of Properties	16
SECTION 3.12.	Solvency	16
SECTION 3.13.	Security Documents	16
SECTION 3.14.	No Material Adverse Effect	17
SECTION 3.15.	Contractual or Other Restrictions	17
SECTION 3.16.	Insurance	17
SECTION 3.17.	Deposit Accounts and Securities Accounts	17
SECTION 3.18.	Licenses and Permits	17
SECTION 3.19.	Representations and Warranties in Credit Documents; No Default	18
ARTICLE IV.	CONDITIONS PRECEDENT	18
SECTION 4.01.	Documents	18
SECTION 4.02.	Collateral	18
SECTION 4.03.	Solvency and Financials	18
SECTION 4.04.	Payment of Outstanding Indebtedness	19
SECTION 4.05.	Material Adverse Effect	19
SECTION 4.06.	Fees and Expenses	19
SECTION 4.07.	No Default; Representations and Warranties	19
SECTION 4.08.	Approvals, Consents, etc	19

ARTICLE V.	AFFIRMATIVE COVENANTS	19
SECTION 5.01.	Financial Information	19
SECTION 5.02.	Notices and Reports	21
SECTION 5.03.	Books, Records and Inspections	21
SECTION 5.04.	Maintenance of Insurance	21
SECTION 5.05.	Payment of Taxes	21
SECTION 5.06.	Maintenance of Existence	21
SECTION 5.07.	Maintenance of Properties	22
SECTION 5.08.	End of Fiscal Years; Fiscal Quarters	22
SECTION 5.09.	Additional Guarantors and Grantors	22
SECTION 5.10.	Use of Proceeds	23
SECTION 5.11.	Further Assurances	23
SECTION 5.12.	Bank Accounts	23
SECTION 5.13.	Quarterly Lender Meeting	24
SECTION 5.14.	Board Observation Rights	24
SECTION 5.15.	Compliance with Laws, Etc	24
SECTION 5.16.	Licenses and Permits	24
SECTION 5.17.	Post-Closing Covenant	25
ARTICLE VI.	NEGATIVE COVENANTS	25
SECTION 6.01.	Limitation on Indebtedness	26
SECTION 6.02.	Limitation on Liens	26
SECTION 6.03.	Consolidation, Merger, etc	27
SECTION 6.04.	Permitted Dispositions	28
SECTION 6.05.	Investments	28
SECTION 6.06.	Restricted Payments, etc	28
SECTION 6.07.	Modification of Certain Agreements	29
SECTION 6.08.	Transactions with Affiliates	29
SECTION 6.09.	Restrictive Agreements, etc	29
SECTION 6.10.	Certain Transactions	29
SECTION 6.11.	Changes in Business	29
SECTION 6.12.	Financial Covenants	30

ARTICLE VII.	EVENTS OF DEFAULT	30
SECTION 7.01.	Listing of Events of Default	30
SECTION 7.02.	Remedies Upon Event of Default	33
SECTION 7.03.	Gaming Laws	33
ARTICLE VIII.	MISCELLANEOUS	34
SECTION 8.01.	Amendments and Waivers	34
SECTION 8.02.	Notices and Other Communications; Facsimile Copies	35
SECTION 8.03.	No Waiver; Cumulative Remedies	35
SECTION 8.04.	Survival of Representations and Warranties	35
SECTION 8.05.	Payment of Expenses; Indemnification; Taxes	35
SECTION 8.06.	Successors and Assigns; Participations and Assignments	36
SECTION 8.07.	Adjustments; Set-off	37
SECTION 8.08.	Counterparts	37
SECTION 8.09.	Choice of Law and Venue; Jury Trial Waiver; Judicial Reference Provision	38
SECTION 8.10.	Acknowledgments	41
SECTION 8.11.	Disclosure	41
SECTION 8.12.	Releases of Guarantees and Liens	41
SECTION 8.13.	Administrative Agent	42
SECTION 8.14.	Register	43
SECTION 8.15.	Interest Rate Limitation	44
SECTION 8.16.	Revival and Reinstatement of Obligations; Certain Waivers	44
SECTION 8.17.	Gaming Laws	44

 

 

 

 

 

LOAN AGREEMENT

THIS LOAN AGREEMENT, dated as of August 29, 2016 (this "Agreement"), is by and among GALAXY GAMING, INC., a Nevada corporation (the "Borrower"), the Guarantors from time to time party hereto, the lenders from time to time party hereto (each, a "Lender" and, collectively, the "Lenders") and BREAKAWAY CAPITAL MANAGEMENT, LLC, a Delaware limited liability company ("Breakaway"), as administrative agent for the Lenders and as collateral agent for the Lenders (in each such capacity, together with its successors and assigns in such capacity, the "Administrative Agent").

ARTICLE I.
Defined Terms; Etc.

"Adjusted EBITDA" means, for any Test Period, an amount determined for the Companies on a consolidated basis equal to, without duplication, (a) the consolidated net income (or deficit) of the Companies determined in accordance with GAAP; provided, that there shall be excluded (i) the income (or loss) of any Person in which any Person (other than a Company) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid in cash to a Credit Party during such specified period and (ii) the income of any Subsidiary of the Borrower to the extent that the declaration or payment of dividends or other distributions by such Subsidiary is not at the time permitted by the terms of any contractual obligation or Applicable Law, plus (b) to the extent reducing Consolidated Net Income, the sum of (i) the interest expense of the Companies, (ii) provisions for Taxes based on income, (iii) total depreciation expense, (iv) total amortization expense, (v) New Growth Initiative Payroll Expenses, (vi) research and development costs in excess of $500,000 per year, calculated in accordance with GAAP, (vii) non-cash compensation expenses (including deferred non-cash compensation expenses), or other non-cash expenses or charges, arising from the sale or issuance of Capital Stock, the granting of stock options, and the granting of stock appreciation rights and similar arrangements (including any repricing, amendment, modification, substitution, or change of any such Capital Stock, stock option, stock appreciation rights, or similar arrangements) minus the amount of any such expenses or charges when paid in cash to the extent not deducted in the computation of net income (or loss), (viii) other non-cash charges, expenses or losses and (ix) extraordinary non-recurring charges, expenses or losses minus (c) to the extent increasing Consolidated Net Income, (i) non-cash gains and (ii) extraordinary non-recurring gains.

"Affiliate" means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

"Applicable Laws" means, as to any Person, any law (including common law), statute, regulation, ordinance, rule, order, policy, decree, judgment, consent decree, writ, injunction, settlement agreement or governmental requirement enacted, promulgated or imposed or entered into or agreed by any Governmental Authority or determination of an arbitrator, in each case applicable to or binding on such Person or any of its property, products, business or operations or the consummation of the Transactions.

"Applicable Premium" means in connection with any prepayment or repayment of all or any portion of the Outstanding Amount of the Term Loans, (i) after the first anniversary of the Closing Date but on or prior to the second anniversary of the Closing Date, four percent (4%) of the Outstanding Amount of the Term Loans being, or required to be, prepaid or repaid; (ii) after the second anniversary of the Closing Date but on or prior to the third anniversary of the Closing Date, two percent (2%) of the Outstanding Amount of the Term Loans being, or required to be, prepaid or repaid; (iii) after the third anniversary of the Closing Date but on or prior to the fourth anniversary of the Closing Date, one percent (1%) of the Outstanding Amount of the Term Loans being, or required to be, prepaid or repaid; and (iv) after the fourth anniversary of the Closing Date but on or prior to the Closing Date, zero percent (0%) of the Outstanding Amount of the Term Loans being, or required to be, prepaid or repaid.

 

"Applicable Rate" means fourteen percent (14%) per annum; provided, that solely after the first anniversary of the Closing Date, if the Unadjusted Total Leverage Ratio determined as of the last day of any fiscal quarter is less than 2.50:1.00, the "Applicable Rate" solely for the following fiscal quarter will be reduced to twelve and a half percent (12.5%) per annum.

"Bankruptcy Code" means title 11 of the United States Code, as in effect from time to time.

"Board of Directors" means, as to any Person, the board of directors (or comparable managers) of such Person, or any committee thereof duly authorized to act on behalf of the board of directors (or comparable managers).

"California Gaming Authorities" means the California Gambling Control Commission, the California Bureau of Gambling Control and all other applicable state, county, city and municipal authorities within the State of California possessing regulatory, licensing or permit authority over the ownership or operation of gaming activities or the manufacture, sale or distribution of gaming products, gaming devices, associated equipment or other gaming equipment in the State of California (or any such county, city or municipality therein).

"Capital Expenditures" means, for any specified period, the sum of, without duplication, all expenditures made, directly or indirectly, by the Companies during such period, determined on a consolidated basis in accordance with GAAP, that are or should be reflected as additions to property, plant or equipment or similar items reflected in the consolidated statement of cash flows of the Companies, or have a useful life of more than one year, but excluding expenditures made for assets leased to a customer during such period.

"Capital Stock" means any and all shares, interests, participations, units or other equivalents (however designated) of capital stock of a corporation, membership interests in a limited liability company, partnership interests of a limited partnership, any and all equivalent ownership interests in a Person and any and all warrants, rights or options to purchase any of the foregoing.

"Capitalized Lease Obligations" means, as applied to any Person, all obligations under all leases of property that have been or should be, in accordance with GAAP, recorded as capitalized leases on the balance sheet of such Person or any of its Subsidiaries (excluding the footnotes thereto), on a consolidated basis.

"Change of Control" means any of the following:  (a) any Person or two or more Persons acting in concert (other than Permitted Holders), shall have acquired beneficial ownership, directly or indirectly, of Capital Stock of the Borrower (or other securities convertible into such Capital Stock) representing thirty-five percent (35%) or more of the combined voting power of all Capital Stock of the Borrower entitled (without regard to the occurrence of any contingency) to vote for the election of members of the Board of Directors of the Borrower; (b) any Person or two or more Persons acting in concert (other than Permitted Holders), shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation thereof, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence over the management or policies of the Borrower or control over the Capital Stock of such Person entitled to vote for members of the Board of Directors of the Borrower on a fully-diluted basis (and taking into account all such Equity Interests that such Person or group has the right to acquire pursuant to any option right) representing thirty-five percent (35%) or more of the combined voting power of such Capital Stock; (c) during any period of twenty-four (24) consecutive months commencing on or after the Closing Date, the occurrence of a change in the composition of the Board of Directors of the Borrower such that a majority of the members of such Board of Directors are not Continuing Directors; or the Borrower fails to own and control, directly or indirectly, 100% of the Capital Stock of each other Credit Party.

 

"Closing Date" means August 29, 2016.

"Code" means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

"Collateral" means any assets of the Credit Parties upon which the Administrative Agent has been granted a Lien in connection with this Agreement.

"Collections" means all cash, checks, credit card slips or receipts, notes, instruments, and other items of payment (including insurance proceeds, proceeds of cash sales, rental proceeds, and tax refunds) of the Credit Parties.

"Companies" means Borrower and its direct and indirect Subsidiaries.

"Contingent Liability" means, for any Person, any agreement, undertaking or arrangement by which such Person guarantees or otherwise is contingently liable upon the Indebtedness of any other Person or guarantees the payment of dividends or other distributions upon the Capital Stock of any other Person.

"Continuing Director" means (a) any member of the Board of Directors who was a director (or comparable manager) of the Borrower on the Closing Date, and (b) any individual who becomes a member of the Board of Directors after the Closing Date if such individual was approved, appointed or nominated for election to the Board of Directors by either the Permitted Holders or a majority of the Continuing Directors.

"Control" means (other than when used in the terms "Change of Control" and "Control Agreement") the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.  The terms "Controlling" and "Controlled" have meanings correlative thereto.  Without limiting the generality of the foregoing, a Person shall be deemed to be Controlled by another Person if such other Person possesses, directly or indirectly, the power to vote ten percent (10%) or more of the securities having ordinary voting power for the election of directors, managing general partners or the equivalent.

"Control Agreement" means a control agreement, in form and substance reasonably satisfactory to the Administrative Agent, executed and delivered by the applicable Credit Party, the Administrative Agent, and the applicable securities intermediary or bank, which agreement is sufficient to give the Administrative Agent "control" over each of such Credit Party's securities accounts, deposit accounts or investment property, as the case may be.

 

"Credit Documents" means this Agreement, any Control Agreement, the Fee Letter, the Subordination Agreement, any Validity and Support Agreement, any Security Document, any Note issued by the Borrower hereunder, any subordination agreements in favor of the Administrative Agent with respect to this Agreement, and any other document, instrument, certificate or agreement executed by any Credit Party, and delivered to the Administrative Agent or any Lender in connection with any of the foregoing or the Obligations, together with any modification of any term, or any waiver with respect to, any of the foregoing.

"Credit Party" means the Borrower and each of the Guarantors.

"Default" means any event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default.

"Default Rate" means an interest rate equal to the sum of:  (a) the Applicable Rate; plus (b) two percent (2%) per annum.

"Depositary Bank" means each bank, financial institution, securities intermediary or other such Person party to a Control Agreement.

"Disposition" means, with respect to any Person, any sale, transfer, lease, contribution or other conveyance (including by way of merger) of, or the granting of options, warrants or other rights to, any of such Person's or their respective Subsidiaries' assets (including accounts receivable and Capital Stock of Subsidiaries) to any other Person in a single transaction or series of transactions.

"Disqualified Capital Stock" means any Capital Stock that, by its terms (or by the terms of any security or other Capital Stock into which it is convertible or for which it is exchangeable) or upon the happening of any event or condition, (a) matures or is mandatorily redeemable (other than solely for Qualified Capital Stock), pursuant to a sinking fund obligation or otherwise, (b) is redeemable at the option of the holder thereof (other than solely for Qualified Capital Stock), in whole or in part, (c) provides for the scheduled payment of dividends in cash or (d) is or becomes convertible into or exchangeable for Indebtedness or any other Capital Stock that would constitute Disqualified Capital Stock, in each case, prior to the date that is one hundred and eighty (180) days after the Maturity Date.

"Domestic Subsidiary" means each Subsidiary of the Borrower that is a "United States person" within the meaning of Section 7701(a)(30) of the Code.

"Event of Loss" means, with respect to any property of any Credit Party, any of the following:  (a) any loss, destruction or damage of such property; or (b) any actual condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, of such property, or confiscation of such property or the requisition of the use of such property.

"Existing Indebtedness" means the Borrower's existing Indebtedness, as set forth on Schedule I, that will remain outstanding after the Closing Date.

"Extraordinary Receipts" means any amounts received by the Borrower or any of its Subsidiaries not in the ordinary course of business (and not consisting of proceeds of Dispositions or Indebtedness), including (i) foreign, United States, state or local tax refunds, (ii) proceeds of pension plan reversions, (iii) proceeds of insurance (other than an Event of Loss), (iv) proceeds of judgments, settlements or other consideration of any kind in connection with any cause of action, (v) indemnity payments and (vi) any purchase price adjustment received in connection with any purchase agreement and any amounts received from escrow arrangements in connection with any purchase agreement.

 

"Fee Letter" means the Fee Letter, dated as of the date hereof, by and between the Borrower and Breakaway.

"Fees" means all amounts payable pursuant to, or referred to in the Fee Letter.

"Foreign Subsidiary" means each Subsidiary of a Credit Party that is not a Domestic Subsidiary.

"GAAP" means generally accepted accounting principles in the United States of America set forth from time to time.  All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP.

"Gaming Authorities" means the Nevada Gaming Authorities, the California Gaming Authorities, and each other federal, state or local regulatory agency, board or commission and each tribal authority or agency that has jurisdiction over the ownership or operation of gaming establishments or the manufacture, sale or distribution of gaming products, gaming devices, associated equipment or other gaming equipment.

"Gaming Laws" means all applicable federal, state, local and tribal laws, rules, ordinances and regulations pursuant to which the Gaming Authorities possess regulatory, licensing or permit authority over the ownership or operation of gaming establishments or the manufacture, sale or distribution of gaming products, gaming devices, associated equipment or other gaming equipment in any jurisdiction where the Borrower or its Subsidiaries do business.

"Gaming License" means any finding of suitability, registration, license, qualification, franchise or other approval or authorization issued by any Gaming Authority and required to develop gaming products or gaming devices or to own or lease gaming equipment or to engage in the manufacture, sale or distribution of gaming products, gaming devices, associated equipment or other gaming equipment in any country, state or other jurisdiction in which the Borrower or any of its Subsidiaries conduct business.

"Gaming Subsidiary" means any Subsidiary of the Borrower that holds a Gaming License.

"Governing Documents" means, with respect to any Person, the certificate or articles of incorporation, by-laws, or other organizational documents of such Person.

"Governmental Authority" means the government of the United States, any foreign country or any multinational authority, or any state, commonwealth, protectorate or political subdivision thereof, and any entity, body or authority exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including the Pension Benefit Guaranty Corporation and other quasi-governmental entities established to perform such functions.

"Guarantors" means (a) each Person that is a Subsidiary on the Closing Date, and (b) each Person that becomes a party to the Security Agreement or otherwise provides a guarantee for the payment and performance of the Obligations pursuant to an agreement reasonably acceptable to the Administrative Agent after the Closing Date.

"Hedging Agreement" means (a) any and all documents that provide for an interest rate, credit, commodity or equity swap, cap, floor, collar, forward foreign exchange transaction, currency swap, cross currency rate swap, currency option, or any combination of, or option with respect to, these or similar transactions, for the purpose of hedging exposure to fluctuations in interest or exchange rates, loan, credit exchange, security, or currency valuations or commodity prices, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement or any other master agreement, including any such obligations or liabilities thereunder.

 

"Historical Financial Statements" means (a) the audited consolidated financial statements of the Borrower for the fiscal year ended December 31, 2015, and (b) the unaudited consolidated financial statements of the Borrower for the fiscal year to date period ended June 30, 2016.

"Indebtedness" means, as to any Person, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:  (a) all indebtedness of such Person (including any partnership or joint venture in which such person is a general partner) for borrowed money and all indebtedness of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments; (b) the maximum amount (after giving effect to any prior drawings or reductions which may have been reimbursed) of all letters of credit (including standby and commercial), bankers' acceptances, bank guaranties, surety bonds, performance bonds and similar instruments issued or created by or for the account of such Person; (c) all obligations of such Person to pay the deferred purchase price of property or services other than trade accounts payable in the ordinary course of business (but including any earn-out obligations) that are not longer than 60 days past due; (d) indebtedness secured by a Lien on property owned by such Person (including indebtedness arising under conditional sales or other title retention agreements and mortgage, industrial revenue bond, industrial development bond and similar financings), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; provided, that the amount of such Indebtedness shall be deemed to be equal to the lesser of (i) the aggregate unpaid amount of such Indebtedness and (ii) the fair market value of the property encumbered thereby as determined by such Person in good faith; (e) all Capitalized Lease Obligations; (f) all obligations of such Person in respect of Disqualified Capital Stock; and (g) all guarantees of such Person in respect of any of the foregoing.

"Investment" means, relative to any Person, (a) any loan, advance or extension of credit made by such Person to any other Person, including the purchase by such first Person of any bonds, notes, debentures or other debt securities of any such other Person; (b) Contingent Liabilities in favor of any other Person; and (c) any Capital Stock or other investment held by such Person in any other Person.

"Key Person" means Robert Saucier.

"Lien" means any mortgage, pledge, security interest, hypothecation, assignment for collateral purposes, lien (statutory or other) or similar encumbrance, and any easement, right-of-way, license, restriction (including zoning restrictions), defect, exception or irregularity in title or similar charge or encumbrance (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement or any lease in the nature thereof).

"Material Adverse Effect" means an effect that results in or causes, or could reasonably be expected to result in or cause, a material adverse change in any of (a) the business, assets, liabilities (actual or contingent), operations, condition (financial or otherwise), results of operations, performance or prospects of the Companies taken as a whole, (b) the validity or enforceability of this Agreement or any of the other Credit Documents, (c) the ability of any Credit Party to perform its obligations under any Credit Document or (d) the rights or remedies of the Secured Parties or the Lenders hereunder or thereunder (including the priority of any Liens granted to Administrative Agent in the Collateral).

 

"Material Contracts" means, collectively, (a) the Transaction Documents (other than the Credit Documents), (b) any other agreement evidencing, securing or pertaining to any Indebtedness in excess of $250,000, (c) any real property lease, (d) any operating lease where annual rentals exceed $250,000, (e) any agreement having annual payments in excess of $250,000, (f) any license agreement or similar agreement granting intellectual property rights of a third Person to any Company, to the extent the consideration payable thereunder to such Person by any Company exceeds $1,250,000 in the aggregate during the term of this Agreement or $250,000 annually, (g) any license agreement or similar agreement granting intellectual property rights of any Company to a third Person, to the extent the consideration payable thereunder to any Credit Party or any of its Subsidiaries by such Person exceeds $1,250,000 in the aggregate during the term of this Agreement or $250,000 annually,  and (h) any other agreement the termination of which (without contemporaneous replacement) could reasonably be expected to have a Material Adverse Effect.

"Maturity Date" means the date that is five (5) years after the Closing Date.

"Maximum Rate" means, at any time, the maximum rate of non-usurious interest permitted by Applicable Law.

"Mortgaged Property" means each parcel of real property and improvements thereto with respect to which a mortgage (or similar instrument) is granted pursuant to Section 6.11.

"Nevada Gaming Authorities" means the Nevada Gaming Commission, the Nevada Gaming Control Board and all applicable county, city and municipal authorities within the State of Nevada possessing regulatory, licensing or permit authority over the ownership or operation of gaming activities or the manufacture, sale or distribution of gaming products, gaming devices, associated equipment or other gaming equipment in the State of Nevada (or any such county, city or municipality therein).

"New Growth Initiative Payroll Expenses" means amounts expensed by the Company for payroll-related expenses, including salaries and wages, payroll taxes and benefits for company employees hired for the first time (and not to replace, or replace the work of, any existing employee or contractor) in such Test Period.

"Note" means a promissory note substantially in the form of Exhibit A.

"Obligations" means all obligations (monetary or otherwise, whether absolute or contingent, matured or unmatured) of the Credit Parties arising under or in connection with any Credit Document, including all fees payable under any Credit Document (including the Fees), all principal of and interest on the Term Loans (including all interest accruing during the pendency of any proceeding of the type described in Section 7.01(g), whether or not allowed in such proceeding), all premiums (including any Applicable Premium) on the Term Loans and all costs, expenses and indemnities payable under any Credit Document, in each case, whether primary, secondary, direct, contingent, fixed or otherwise (including, in each case, all monetary or other obligations accruing or incurred during the pendency of any proceeding of the type described in Section 7.01(g), whether or not allowed in such proceeding).

"Outstanding Amount" means, with respect to any Term Loans on any date, the aggregate outstanding principal amount thereof after giving effect to prepayments or repayments of such Term Loans occurring on such date occurring on such date.

"Permits" means, with respect to any Person, any permit, approval, authorization, license, registration, certificate, concession, grant, franchise, variance or permission from, and any other contractual obligations with, any Governmental Authority, in each case whether or not having the force of law and applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

 

"Permitted Holders" means, as of any date, Robert Saucier and any Person that is Controlled by him.

"Person" means any individual, partnership, joint venture, firm, corporation, limited liability company, association, trust or other enterprise or any Governmental Authority.

"Pledged Stock" has the meaning given to such term in the Security Agreement.

"Qualified Capital Stock" means any Capital Stock that is not Disqualified Capital Stock.

"Refinanced Indebtedness" means the Borrower's existing indebtedness, as set forth on Schedule II, that will be repaid in full with the proceeds of the Term Loans.

"Register" means a register for the recordation of the names and addresses of Lenders and, as applicable, the Term Loan Commitments of each Lender pursuant to the terms hereof from time to time, and the principal amount of (and interest on) Lenders' interests in the Term Loans and other Obligations.

"Related Parties" means, with respect to any specified Person, such Person's Affiliates and the directors, officers, employees, agents, trustees, advisors of such Person and any Person that possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of such Person, whether through the ability to exercise voting power, by contract or otherwise.

"Required Lenders" means, at any time, the Lenders holding a majority of the outstanding principal amount of the Term Loans at such time.

"Restricted Payment" means, with respect to any Person, (a) the declaration or payment of any dividend on, or the making of any payment or distribution on account of, or setting apart assets for a sinking or other analogous fund for the purchase, redemption, defeasance, retirement or other acquisition of, any class of Capital Stock of such Person or any warrants or options to purchase any such Capital Stock, whether now or hereafter outstanding, or the making of any other distribution in respect thereof, either directly or indirectly, whether in cash or property, (b) any payment of a management fee (or other fee of a similar nature) by such Person to any holder of its Capital Stock or any Affiliate thereof, and (c) any payment or prepayment of principal of, or premium or interest on, any Indebtedness subordinate to the Obligations unless such payment is permitted under the terms of the subordination agreement applicable thereto.

"Secretary's Certificate" means, with respect to each Credit Party, a certificate from the secretary of such Credit Party (a) attesting to the resolutions of such Credit Party's Board of Directors authorizing its execution, delivery and performance of the Credit Documents to which it is a party, (b) attaching such resolutions, (c) authorizing specific officers of such Credit Party to execute the same, (d) attesting to the incumbency and signatures of such specific officers of such Credit Party, (e) attaching such Credit Party's Governing Documents, as amended, modified, or supplemented prior to the Closing Date, which Governing Documents (i) shall be certified by the secretary of such Credit Party, and (ii) with respect to Governing Documents that are charter documents, certified as of a recent date (not more than thirty (30) days prior to the Closing Date) by the appropriate government official, (f) attaching certificates of status with respect to such Credit Party, dated within ten (10) days of the Closing Date, such certificate to be issued by the appropriate officer of the jurisdiction of organization of such Credit Party, which certificate shall indicate that such Credit Party is in good standing in such jurisdiction, and (f) attaching certificates of status with respect to such Credit Party, each dated within thirty (30) days prior to the Closing Date, such certificates to be issued by the appropriate officer of the jurisdictions (other than the jurisdiction of organization of such Credit Party) in which its failure to be duly qualified or licensed would constitute a Material Adverse Effect, which certificates shall indicate that such Credit Party is in good standing in such jurisdictions.

 

"Secured Parties" means, collectively, (a) the Lenders, (b) the Administrative Agent, (c) the beneficiaries of each indemnification obligation undertaken by any Credit Party under the Credit Documents, (d) any successors, indorsees, transferees and assigns of each of the foregoing and (e) any other holder of any Secured Obligation (as defined in the Security Agreement).

"Security Agreement" means a Guaranty and Security Agreement, by and among each Credit Party and the Administrative Agent for the benefit of the Secured Parties substantially in the form of Exhibit B.

"Security Documents" means, collectively, the Security Agreement, any Mortgage and each other security agreement or other instrument executed and delivered pursuant to Section 5.11 or pursuant to any of the Security Documents to guarantee or secure any of the Obligations.

"Solvent" means, with respect to any Person, at any date, that (a) the sum of such Person's debt (including Contingent Liabilities) does not exceed the present fair saleable value of such Person's present assets (which, for this purpose, shall include, without limitation, rights of contribution in respect of obligations for which such Person has provided a guarantee), (b) such Person's capital is not unreasonably small in relation to its business as contemplated on such date, (c) such Person has not incurred and does not intend to incur debts including current obligations beyond its ability to pay such debts as they become due (whether at maturity or otherwise), and (d) such Person is "solvent" within the meaning given that term and similar terms under Applicable Laws relating to fraudulent transfers and conveyances.

"Subordination Agreement" means a subordination agreement, substantially in the form of Exhibit C, executed and delivered by the Credit Parties and each holder of Existing Indebtedness, including Carpathia Associates, LLC, a New Mexico limited liability company.

"Subsidiary" of any Person means (a) any corporation more than 50% of whose Voting Stock having by the terms thereof power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries and (b) any partnership, association, joint venture or other entity in which such Person directly or indirectly through one or more Subsidiaries has more than a 50% equity interest at the time.  Unless otherwise expressly provided, all references herein to a "Subsidiary" shall mean a Subsidiary of the Borrower.

"Taxes" means all income, stamp or other taxes, duties, levies, imposts, charges, assessments, fees, deductions or withholdings, now or hereafter imposed, enacted, levied, collected, withheld or assessed by any Governmental Authority, and all interest, penalties or similar liabilities with respect thereto.

"Term Loan Commitment" means, in the case of each Lender that is a Lender on the date hereof, the amount set forth opposite such Lender's name on Schedule 1.01 as such Lender's "Term Loan Commitment", as the same may be changed from time to time pursuant to the terms hereof.

 

"Test Period" means, for any determination under this Agreement, the four consecutive fiscal quarters of the Borrower most recently ended as of such date of determination.

"Total Leverage Ratio" means, with respect to any Person, as of any date, the ratio of (a)  Indebtedness of such Person outstanding as of such date to (b) Adjusted EBITDA of such Person for the Test Period ended on, or most recently prior to, such date.

"Total Term Loan Commitment" means the sum of the Term Loan Commitments.  On the Closing Date, the Total Term Loan Commitment shall be $10,500,000 as set forth on Schedule 1.01.

"Transaction Documents" means the Credit Documents, the Warrant Documents, and each of the other documents executed and/or delivered in connection with the Transactions.

"Transactions" means, collectively, the entry into this Agreement and the other transactions contemplated by the Transaction Documents.

"UCC" means the Uniform Commercial Code as from time to time in effect in the State of California.

"Unadjusted EBITDA" means, for any Test Period, an amount determined for the Companies on a consolidated basis equal to, without duplication, (a) the consolidated net income (or deficit) of the Companies determined in accordance with GAAP; provided, that there shall be excluded (i) the income (or loss) of any Person in which any Person (other than a Company) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid in cash to a Credit Party during such specified period and (ii) the income of any Subsidiary of the Borrower to the extent that the declaration or payment of dividends or other distributions by such Subsidiary is not at the time permitted by the terms of any contractual obligation or Applicable Law, plus (b) to the extent reducing Consolidated Net Income, the sum of (i) the interest expense of the Companies, (ii) provisions for Taxes based on income, (iii) total depreciation expense, (iv) total amortization expense, (v) non-cash compensation expenses (including deferred non-cash compensation expenses), or other non-cash expenses or charges, arising from the sale or issuance of Capital Stock, the granting of stock options, and the granting of stock appreciation rights and similar arrangements (including any repricing, amendment, modification, substitution, or change of any such Capital Stock, stock option, stock appreciation rights, or similar arrangements) minus the amount of any such expenses or charges when paid in cash to the extent not deducted in the computation of net income (or loss), (vi) other non-cash charges, expenses or losses and (vi) extraordinary non-recurring charges, expenses or losses minus (c) to the extent increasing Consolidated Net Income, (i) non-cash gains and (ii) extraordinary non-recurring gains.

"Unadjusted Total Leverage Ratio" means, with respect to any Person, as of any date, the ratio of (a) Indebtedness of such Person outstanding as of such date to (b) Unadjusted EBITDA of such Person for the Test Period ended on, or most recently prior to, such date.

"Validity and Support Agreement" shall mean each validity and support agreement, substantially in the form of Exhibit D, executed and delivered by Robert Saucier.

"Voting Stock" means, with respect to any Person, shares of such Person's Capital Stock having the right to vote for the election of directors (or Persons acting in a comparable capacity) of such Person under ordinary circumstances.

 

"Warrant Agreement" means a warrant agreement dated as of even date with this Agreement, executed and delivered by the Borrower and the Administrative Agent, the form and substance of which is reasonably satisfactory to the Administrative Agent.

"Warrant Certificate" means each warrant certificate dated as of even date with this Agreement, executed and delivered by the Borrower to the Administrative Agent, the form and substance of which is satisfactory to the Administrative Agent.

"Warrant Documents" means the Warrant Agreement, the Warrants, any Warrant Certificate issued by the Borrower, and any other document, instrument, certificate or agreement executed by any Credit Party, and delivered to the Administrative Agent or any Lender in connection with the Warrant Agreement, together with any modification of any term, or any waiver with respect to, any of the foregoing.

"Warrants" means the warrants issued in connection with the Warrant Agreement, which shall be evidenced by Warrant Certificates.

ARTICLE II.
CREDIT FACILITIES.

 

 

 

ARTICLE III.
REPRESENTATIONS AND WARRANTIES.

In order to induce the Lenders to enter into this Agreement and make the Term Loans as provided for herein, the Credit Parties make the following representations and warranties to the Lenders, all of which shall survive the Closing Date:

 

 

 

 

ARTICLE IV.
CONDITIONS PRECEDENT.

The occurrence of the Closing Date is subject to the satisfaction of the following conditions precedent:

 

ARTICLE V.
AFFIRMATIVE COVENANTS.

 

 

 

 

 

 

ARTICLE VI.
NEGATIVE COVENANTS.

 

 

 

provided, that no Investment otherwise permitted under the immediately foregoing clauses (d), (f), (g) or (j) shall be permitted to be made if any Default or Event of Default has occurred and is continuing or would result therefrom.

 

 

ARTICLE VII.
EVENTS OF DEFAULT.

 

 

 

 

ARTICLE VIII.
MISCELLANEOUS.

 

The Borrower agrees, (a) to pay or reimburse the Administrative Agent for all reasonable and documented out-of-pocket costs and expenses incurred in connection with the negotiation, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Transaction Documents, and the consummation and administration of the Transactions, including the reasonable fees, disbursements and other charges of counsel to the Administrative Agent, (b) to pay or reimburse each Lender and the Administrative Agent for all their reasonable and documented out-of-pocket costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement and the other Transaction Documents, including the reasonable fees, disbursements and other charges of counsel to each Lender and of counsel to the Administrative Agent, (c) to pay, indemnify, and hold harmless each Lender and the Administrative Agent from any and all Taxes, if any, that may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Credit Documents and any such other documents and (d) to pay, indemnify and hold harmless each Lender and the Administrative Agent and their respective Related Parties from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, and reasonable and documented (to the extent available) out-of-pocket costs, expenses or disbursements of any kind or nature whatsoever, including reasonable and documented (to the extent available) fees, disbursements and other charges of counsel, with respect to the execution, delivery, enforcement, performance and administration of any Credit Document and any such other documents (all the foregoing in this clause (d), collectively, the "Indemnified Liabilities"); provided, that the Credit Parties shall have no obligation hereunder to the Administrative Agent or any Lender nor any of their Related Parties with respect to Indemnified Liabilities arising from the gross negligence or willful misconduct of the party to be indemnified as determined by a final and non-appealable decision of a court of competent jurisdiction.  The agreements in this Section 8.05 shall survive repayment of the Term Loans and all other amounts payable hereunder and termination of this Agreement.  To the fullest extent permitted by Applicable Law, no Credit Party shall assert, and each Credit Party hereby waives, any claim against any Lender, any Administrative Agent and their respective Related Parties, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Credit Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Term Loan or the use of the proceeds thereof.  Neither any Lender, the Administrative Agent nor any of their respective Related Parties shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Credit Documents or the transactions contemplated hereby or thereby.

 

All payments required to be made by any Credit Party hereunder or under any of the other Credit Document shall be made to the Secured Parties free and clear of, and without deduction for, any and all present and future Taxes.  If any Credit Party shall be required by law to deduct any such Taxes from or in respect of any sum payable hereunder, (i) the sum payable shall be increased as much as shall be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 8.05) each Secured Party receives an amount equal to the sum they would have received had no such deductions been made, (ii) such Credit Party shall make such deductions, and (iii) such Credit Party shall pay the full amount deducted to the relevant taxing or other authority in accordance with applicable law.  Within thirty (30) days after the date of any payment of Taxes, such Credit Party shall furnish to each Lender the original or a certified copy of a receipt evidencing payment thereof.  Each Credit Party shall indemnify and, within ten (10) days of demand therefor, pay the applicable Secured Party for the full amount of Taxes (including any Taxes imposed by any jurisdiction on amounts payable under this Section 8.05) paid by such Secured Party and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally asserted.

 

 

 

 

 

 

 

 

 

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Agreement to be duly executed and delivered as of the date first above written.

 

GALAXY GAMING, INC., a Nevada corporation, as the Borrower
By:	/s/ Robert Saucier
	Name: Robert Saucier
	Title: CEO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SCHEDULE 2.02

TERM LOAN REPAYMENT SCHEDULE

 

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