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| ITEM 1.01. | Entry into a Material Definitive Agreement. |
Contingent Lease Support Agreement
On February 23, 2022, in connection with the Closing, the Company and OpCo Purchaser entered into a post-closing contingent lease support agreement (the “Contingent Lease Support Agreement”) pursuant to which, among other things, the Company may be required to make certain payments (“Support Payments”) to OpCo Purchaser.
The Support Payments are payable on a monthly basis following the Closing through the year ended December 31, 2023, based upon the performance of the Las Vegas Business relative to certain agreed upon target metrics and subject to quarterly and annual adjustments. The target metrics are measured against a benchmark annual EBITDAR (as defined in the Contingent Lease Support Agreement) of the Las Vegas Business equal to $425,595,238 for the annual period beginning on the Closing and ending December 31, 2022 and $500,000,000 for the annual period beginning January 1, 2023 and ending December 31, 2023. The Company’s payment obligations are subject to an annual cap equal to $212,797,619 for the annual period beginning on the Closing and ending December 31, 2022 and $250,000,000 for the annual period beginning on January 1, 2023 and ending on December 31, 2023. Each monthly Support Payment is subject to a prorated cap based on the annual cap.
The foregoing description of the Contingent Lease Support Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Contingent Lease Support Agreement, a copy of which will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the period ending March 31, 2022 to be filed with the Securities and Exchange Commission (the "SEC").
Seller Financing Loan Agreement
At the Closing, the Company, as lender, OpCo Purchaser, as borrower, the parent company of OpCo Purchaser (“Holdings”) and certain subsidiaries of OpCo Purchaser as guarantors party thereto (collectively, and with Holdings, the “Guarantors” and, together with OpCo Purchaser in its capacity as borrower, the “Loan Parties”), entered into the Seller Financing Loan Agreement. The Seller Financing Loan Agreement provides for a six-year senior secured term loan facility in an aggregate principal amount of $1.2 billion (the “Seller Loan”). At the Closing, OpCo Purchaser incurred the Seller Loan. The Seller Loan is guaranteed by the Guarantors and secured by a first-priority lien on substantially all of the Loan Parties’ assets (subject to customary exceptions and limitations), including a leasehold mortgage from OpCo Purchaser over certain real estate that was sold to PropCo Purchaser at the Closing and leased by OpCo Purchaser.
The Seller Loan will bear interest at a rate per annum equal to 1.50% for the calendar years ending December 31, 2022 and December 31, 2023, and 4.25% for each calendar year thereafter, subject to an increase of 1.00% for any interest OpCo Purchaser elects to pay by increasing the principal amount of the Seller Loan prior to January 1, 2024, and an increase of 1.50% for any such election during the calendar year ending December 31, 2024. Any interest to be paid after the calendar year ending December 31, 2024 will be paid in cash.
The Seller Financing Loan Agreement contains certain customary representations and warranties and covenants, subject to customary exceptions and thresholds. The Seller Financing Loan Agreement’s negative covenants restrict the ability of the Loan Parties and their subsidiaries to, among other things, (i) incur debt, (ii) create certain liens on their assets, (iii) dispose of their assets, (iv) make investments or restricted payments, including dividends, (v) merge, liquidate, dissolve, change their business or consolidate with other entities and (vi) enter into affiliate transactions.
The Seller Financing Loan Agreement also contains customary events of default, including payment defaults, cross defaults to material debt, bankruptcy and insolvency, breaches of covenants and inaccuracy of representations and warranties, subject to customary grace periods. Upon an event of default, the Company may declare any then-outstanding amounts due and payable and exercise other customary remedies available to a secured lender.
The foregoing description of the Seller Financing Loan Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Seller Financing Loan Agreement, a copy of which will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the period ending March 31, 2022 to be filed with the SEC.