On April 6, 2010, two wholly-owned subsidiaries of Multimedia Games, Inc. (the “Company”), MGAM Systems, Inc., a Delaware corporation, and MegaBingo, Inc., a Delaware corporation (together, the “Subsidiaries”), entered into the Fourth Amendment to Credit Agreement, dated as of such date, with Comerica Bank, in its capacity as agent (the “Amendment”), which amended the Credit Agreement, dated as of April 27, 2007, by and among the Subsidiaries, certain financial institutions and Comerica Bank, as agent for such financial institutions, as amended by (1) that certain letter amendment, dated as of June 6, 2007, by and among the Subsidiaries, such financial institutions and Comerica Bank, (2) the Amendment to Credit Agreement, dated as of October 26, 2007, by and among the Subsidiaries and Comerica Bank, (3) the Second Amendment to Credit Agreement, dated as of December 20, 2007, by and among the Subsidiaries and Comerica Bank and (4) the Third Amendment to Credit Agreement, dated as of July 22, 2009, by and among the Subsidiaries and Comerica Bank (as amended, the “Credit Agreement”). The Amendment amends the Credit Agreement by, among other things, (i) removing the requirement to maintain a minimum consolidated EBITDA; (ii) amending the consolidated total leverage ratio to a ratio of not greater than 1.50 to 1.00; (iii) reducing the total borrowing capacity of the Credit Agreement by reducing the revolving commitment of the credit facility from $65 million to $45 million; and (iv) amending the definition of Consolidated EBITDA to include any extraordinary, unusual or non-cash non-recurring expenses or losses (including, whether or not otherwise includable as a separate item in the statement of Consolidated Net Income for such period, losses on sales of assets outside the ordinary course of business) of up to $10 million, commencing June 30, 2010. The new definition of Consolidated EBITDA removes certain specific add-backs that were previously included in the definition of Consolidated EBITDA as previously defined in the Credit Agreement (as reflected in the Amendment and referred to herein as “Adjusted EBITDA”). As a result of the modification to the definition of Consolidated EBITDA pursuant to the Amendment, the Company will calculate Adjusted EBITDA differently than in prior public disclosures and earnings releases.
In its earnings releases, the Company uses the non-GAAP measure of EBITDA, which represents earnings before interest, taxes, depreciation, amortization, and accretion of contract rights, and Adjusted EBITDA, which represents the calculation of Consolidated EBITDA, as provided in the Credit Agreement. The revised calculation of “Adjusted EBITDA,” which will go in effect June 30, 2010, will be reported alongside the historical calculation of EBITDA. Adjusted EBITDA will be presented and reconciled to EBITDA and Net Income/Loss. Adjusted EBITDA will continue to be the basis for which compliance with a number of covenants will be determined, including certain ratios. In connection with the Amendment, the Company paid a onetime fee of 27.5 basis points of the $90 million borrowing capacity as well as other customary fees associated with the Amendment. The credit facilities under the Credit Agreement, as amended by the Amendment, are fully syndicated.
The foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Amendment which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated into this report by reference.