Document:

Exhibit 10.1 Agreement

EXECUTION VERSION

LENDER JOINDER AGREEMENT AND REFINANCING AMENDMENT
Dated as of July 16, 2015
among
MARINA DISTRICT FINANCE COMPANY, INC.,
as the Borrower,
MARINA DISTRICT DEVELOPMENT COMPANY, LLC,
as the Guarantor,
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent,
and
the Lenders Party Hereto

    

LENDER JOINDER AGREEMENT AND REFINANCING AMENDMENT

July 16, 2015

		
	To:
	Marina District Finance Company, Inc.

Marina District Development Company, LLC
One Borgata Way
Atlantic City, NJ  08401
Attention:    Josh Hirsberg

		
	To:
	Wells Fargo Bank, National Association,

as the Administrative Agent
333 S. Grand Avenue, 12th Floor
Los Angeles, CA  90071
Attention:    Donald Schubert

Gentlemen and Ladies:

We refer to the Amended and Restated Credit Agreement, dated as of July 24, 2013 (together with all amendments and other modifications, if any, from time to time thereafter made thereto, the “Credit Agreement”), among Marina District Finance Company, Inc., a New Jersey corporation (the “Borrower”), Marina District Development Company, LLC, a New Jersey limited liability company (“MDDC”), the various financial institutions (the “Lenders”) as are, or shall from time to time become, parties thereto, and Wells Fargo Bank, National Association as administrative agent (the “Administrative Agent”) for the Lenders and as L/C Issuer and Swing Line Lender.  Unless otherwise defined herein or the context otherwise requires, terms used herein have the meanings provided in the Credit Agreement.

1.Incremental Term Facility.  Pursuant to Sections 2.17 and 2.18 of the Credit Agreement, the Borrower has requested a term loan facility (the “Incremental Term Facility”) in an aggregate principal amount of up to $650,000,000 and the Lenders party hereto (the “Incremental Term Lenders”) are willing to provide such Incremental Term Facility pursuant to the terms of this joinder agreement and refinancing amendment (this “Agreement”).  This Agreement will be an “Incremental Term Facility Joinder” and a “Refinancing Amendment” as described in Section 2(a) and (b) and the loans made hereunder (the “Incremental Term Loans”) will be “Term Loans” for purposes of, and as defined in, the Credit Agreement and will be subject to all terms and conditions of the Credit Agreement.  For the avoidance of doubt, the “Incremental Term Loans” include both the Initial Incremental Term Loans (as defined below) and the Delayed Draw Term Loans (as defined below).

2.Incremental Term Commitments.

(a)The Incremental Term Facility will be available in multiple borrowings as set forth in this Section 2 but in, any event, in increments of no less than $5,000,000.  Each Incremental Term Lender hereby agrees, subject to satisfaction of the conditions precedent set forth in Section 4.02 of the Credit Agreement and in Section 3(a) and (b) below, to make initial Incremental Term Loans (the “Initial Incremental Term Loans”) to the Borrower on a date which is on or after the Incremental Term Facility Effective Date (as defined below) but before August 31, 2015 (the “Initial Borrowing Date”) in the amount (such Lender’s “Initial Incremental Term Commitment”) set forth opposite such 

Incremental Term Lender’s name on Schedule I attached hereto, which Initial Incremental Term Loans shall comprise an “Incremental Term Facility” under the Credit Agreement. This Agreement shall become an effective “Incremental Term Facility Joinder” under the Credit Agreement with respect to such Facility on such date.

(b)Each Incremental Term Lender agrees, subject to satisfaction of the conditions precedent set forth in Section 3(b) below, to make additional Incremental Term Loans (the “Delayed Draw Term Loans”) to the Borrower from time to time on any Business Day as the Borrower may request (each, a “Delayed Draw Borrowing Date”) prior to the one-year anniversary of the Incremental Term Facility Effective Date (the “Delayed Draw Commitment Termination Date”) in an aggregate amount not to exceed the amount (such Lender’s “Delayed Draw Commitment”) set forth opposite such Incremental Term Lender’s name on Schedule I attached hereto.  Each borrowing of Delayed Draw Term Loans on a Delayed Draw Borrowing Date shall comprise an “Other Term Facility” under the Credit Agreement and this Agreement shall become an effective “Refinancing Amendment” under the Credit Agreement with respect to such Facility on such date.

(c)The Borrower and the Incremental Term Lenders hereby agree that the Incremental Term Facility described in Section 1 above, including each “Incremental Term Facility” and “Other Term Facility” (as such terms are defined in the Credit Agreement) comprising the Incremental Term Facility (as described in Section 1 above), shall upon the making of the relevant Incremental Term Loans be treated as a single “Incremental Term Facility” or “Other Term Facility” for purposes of the Credit Agreement and the other Loan Documents, including for purposes of voluntary and mandatory prepayments (and determining the Lenders’ Pro Rata Shares thereof) and for purposes of any voting matter contemplated under the Credit Agreement or the other Loan Documents.

(d)Each Incremental Term Lender hereby acknowledges and confirms that it has received a copy of the Credit Agreement (including the schedules and exhibits thereto) and each other Loan Document.  Each Incremental Term Lender acknowledges that it has made its own independent investigation and credit evaluation of the Borrower in connection with entering into this Agreement.

3.Conditions Precedent.

(a)This Agreement and the obligation of the Incremental Term Lenders to make the Initial Incremental Term Loans shall become effective on the date (the “Incremental Term Facility Effective Date”) that the Borrower has delivered to the Administrative Agent (which date shall be no later than July 17, 2015):

(i)a certificate of a Responsible Officer of the Borrower certifying that (i) before and after giving effect to the making of the Incremental Term Loans no Default or Event of Default shall exist, (ii) the representations and warranties contained in Article V of the Credit Agreement, in the other Loan Documents and in any document furnished under or connection therewith are true and correct on and as of the Incremental Term Facility Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, and except that the representations and warranties contained in subsections (a) and (b) of Section 5.05 of the Credit Agreement shall be deemed to refer to the most recent statements furnished pursuant to subsections (a) and (b), respectively, of Section 6.01 of the Credit Agreement and (iii) since December 31, 2014 no Material Adverse Effect has occurred;

(ii)an Omnibus Reaffirmation duly executed by the Credit Parties and dated the Incremental Term Facility Effective Date.

(iii)certificates, resolutions and other documents of the Loan Parties of the type referred to in Sections (viii) and (ix) of Section 4.01 of the Credit Agreement in form and substance reasonably satisfactory to the Administrative Agent;

(iv)an amendment reflecting the amendment of the obligations contemplated hereby (the “Mortgage Amendment”), in form and substance reasonably satisfactory to the Administrative Agent and the Incremental Term Lender, with respect to the Mortgaged Property, duly executed and delivered by a Responsible Officer and in form suitable for filing and recording in such filing or recording offices that the Administrative Agent reasonably deems necessary;

(v)favorable opinions of Morrison & Foerster LLP and Brownstein Hyatt Farber Schreck, LLP, counsel to the Loan Parties, addressed to the Administrative Agent and each Lender party hereto, in form and substance reasonably satisfactory to the Administrative Agent;

(vi)an opinion with respect to the Mortgage Amendment from local counsel to the Borrower addressed to the Administrative Agent and each of the Lenders and dated the date of the Mortgage Amendment, in form and substance reasonably satisfactory to the Administrative Agent;

(vii)each Loan Party shall have received all consents, licenses and approvals required in connection with the execution, delivery and performance by such Loan Party, and the validity against such Loan Party, of this Agreement and the transactions and other agreements contemplated herein and all such consents, licenses and approvals shall be in full force and effect;

(viii)the Borrower shall have paid all fees and expenses required to be paid on the Incremental Term Facility Effective Date, including all fees and expenses payable to the Incremental Term Lender; 

(ix)a completed “Life-of-Loan” Federal Emergency Management Agency Standard Flood Hazard Determination (together with a notice about special flood hazard area status and flood disaster assistance duly executed by MDDC) and evidence of flood insurance reasonably satisfactory to the Administrative Agent and otherwise in conformance with applicable law in the event the Mortgaged Property is in an area designated by the Secretary of Housing and Urban Development as a special flood hazard area; and

(x)a duly completed Compliance Certificate for the fiscal quarter ending March 31, 2015.

(b)The obligation of the Incremental Term Lenders to make any Incremental Term Loan shall be subject to the conditions precedent set forth in Section 4.02 of the Credit Agreement as well as the following additional conditions precedent:

(i)a Request for Credit Extension requesting the borrowing of such Incremental Term Loans, which shall have been delivered at least five Business Days prior to the applicable borrowing date;

(ii)evidence in form and substance reasonably satisfactory to the Administrative Agent that the net proceeds of such Incremental Term Loan will be applied as required by the Credit Agreement and this Agreement; 

(iii)endorsements to the title insurance policy of the type referred to in subsection (v) of Section 4.01(a) of the Credit Agreement in form and substance reasonably satisfactory to the Administrative Agent;

(iv)a certificate of a Responsible Officer of the Borrower certifying that (i) before and after giving effect to the making of the Incremental Term Loans no Default or Event of Default shall exist, (ii) the representations and warranties contained in Article V of the Credit Agreement, in the other Loan Documents and in any document furnished under or connection therewith are true and correct on and as of the applicable Borrowing Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, and except that the representations and warranties contained in subsections (a) and (b) of Section 5.05 of the Credit Agreement shall be deemed to refer to the most recent statements furnished pursuant to subsections (a) and (b), respectively, of Section 6.01 of the Credit Agreement and (iii) since December 31, 2014 no Material Adverse Effect has occurred; and

(v)an Additional First Lien Joinder Agreement with respect to the Incremental Term Facility, dated on or prior to the Initial Borrowing Date, duly executed by the Administrative Agent, in its capacity as Authorized Representative for the Incremental Term Facility, the Collateral Agent and the Administrative Agent, in its capacity as Authorized Representative for the Revolving Credit Facility and for each Existing Term Facility in effect as of the Initial Borrowing Date.

4.Interest and Fees.

(a)Subject to the provisions of Section 2.08(b) of the Credit Agreement, (i) at any time and to the extent that the Incremental Term Loans are Eurodollar Rate Loans, the Incremental Term Loans shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Effective Eurodollar Rate (as defined below) for such Interest Period plus the Term Loan Applicable Rate (as defined below) and (ii) at any time and to the extent that the Incremental Term Loans are Base Rate Loans, the Incremental Term Loans shall bear interest on the outstanding principal amount thereof at a rate per annum equal to the Base Rate for such Interest Period plus the Term Loan Applicable Rate; provided, that for purposes of calculating the Base Rate in connection with the Incremental Term Loans, clause (b) of the definition of “Base Rate” shall be deemed to refer to the Effective Eurodollar Rate.

“Effective Eurodollar Rate” means, for any Interest Period with respect to any Incremental Term Loan, the greater of (x) the Eurodollar Rate in effect for such Interest Period and (y) 1.00%.

“Term Loan Applicable Rate” means, with respect to the Incremental Term Loans, (a) in the case of Eurodollar Loans, (i) at any time that the Total Leverage Ratio is equal to or greater than 4.50 to 1.0, 6.00%, 

(ii) at any time that the Total Leverage Ratio is equal to or greater than 3.50 to 1.0 but less than 4.50 to 1.0, 5.75%, (iii) at any time that the Total Leverage Ratio is equal to or greater than 3.00 to 1.0 but less than 3.50 to 1.0, 5.50%, (iv) at any time that the Total Leverage Ratio is equal to or greater than 2.50 to 1.0 but less than 3.00 to 1.0, 5.25%, and (v) at any time that the Total Leverage Ratio is less than 2.50 to 1.0, 5.00%, and (b) in the case of Base Rate Loans, (i) at any time that the Total Leverage Ratio is equal to or greater than 4.50 to 1.0, 5.00%, (ii) at any time that the Total Leverage Ratio is equal to or greater than 3.50 to 1.0 but less than 4.50 to 1.0, 4.75%, (iii) at any time that the Total Leverage Ratio is equal to or greater than 3.00 to 1.0 but less than 3.50 to 1.0, 4.50%, (iv) at any time that the Total Leverage Ratio is equal to or greater than 2.50 to 1.0 but less than 3.00 to 1.0, 4.25%, and (v) at any time that the Total Leverage Ratio is less than 2.50 to 1.0, 4.00%.

Any increase or decrease in the Term Loan Applicable Rate resulting from a change in the Total Leverage Ratio shall become effective as of the first Business Day immediately following the date a Compliance Certificate is delivered pursuant to Section 6.02(b) of the Credit Agreement in the case of the first three fiscal quarters of any fiscal year and immediately following the date a certification of the Total Leverage Ratio is delivered pursuant to Section 6.02(c) of the Credit Agreement in the case of the final quarter of any fiscal year; provided, however, that if a Compliance Certificate is not delivered when due in accordance with Section 6.02(b) of the Credit Agreement or a certification of Total Leverage Ratio is not delivered when due in accordance with Section 6.02(c) of the Credit Agreement, then the Term Loan Applicable Rate shall be the rate referred to in clause (a)(i) or (b)(i) of the definition thereof (set forth above) as of the first Business Day after the date on which such Compliance Certificate was required to have been delivered and shall continue to apply until the first Business Day after the date such certificate is delivered.

Notwithstanding the foregoing, in the event that the Effective Yield (as defined below) for any Term Facility under the Credit Agreement (other than the Incremental Term Facility contemplated in Section 1 hereof), as determined by the Administrative Agent, is higher than the Effective Yield for the Incremental Term Facility, as determined by the Administrative Agent, by more than 50 basis points, then the interest rates referred to above shall be increased to the extent necessary so that the Effective Yield for the Incremental Term Facility, as determined by the Administrative Agent, is equal to the Effective Yield for such other Term Facility minus 50 basis points.  If necessary, this Agreement shall be amended, in form and substance reasonably satisfactory to the Administrative Agent and the Borrower, to reflect such increase in interest rate.

(b)The Borrower shall pay to the Administrative Agent for the account of each Incremental Term Lender in accordance with its Delayed Draw Commitment, an unused fee (the “Delayed Draw Unused Fee”) equal to 0.25% per annum times the actual daily amount of such Incremental Term Lender’s Delayed Draw Commitment.  The Delayed Draw Unused Fee shall accrue at all times from and after the Incremental Term Facility Effective Date to and including the earliest to occur of (i) the date on which the Delayed Draw Commitments are terminated in full pursuant to Section 5(c) or reduced to zero as a result of the making of Delayed Draw Term Loans and (ii) the Delayed Draw Commitment Termination Date, and shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the Incremental Term Facility Effective Date, and on the Maturity Date as described in Section 5(b) below, and calculated as provided in Section 2.10 of the Credit Agreement.

5.Repayment of Incremental Term Loans; Termination or Reduction of Delayed Draw Commitments.

(a)The Borrower shall make repayments of (i) the Initial Incremental Term Loans on or before the last Business Day of each fiscal quarter of the Borrower commencing with the fiscal quarter 

of the Borrower ending December 31, 2015 in an amount equal to the Amortization Percentage (as defined below) times the aggregate principal amount of the Initial Incremental Term Loans made on the Initial Borrowing Date and (ii) the Delayed Draw Term Loans on or before the last Business Day of each fiscal quarter of the Borrower commencing with the first full fiscal quarter of the Borrower ending after the Delayed Draw Borrowing Date for such Delayed Draw Term Loans in an amount equal to the Amortization Percentage times the aggregate principal amount of the Delayed Draw Term Loans made on such Delayed Draw Borrowing Date.

“Amortization Percentage” means 0.25%.

(b)The Borrower shall repay the outstanding principal amount of all Incremental Term Loans on July 16, 2023, which date shall be the Maturity Date for the Incremental Term Facility.

(c)The Borrower may, upon notice to the Administrative Agent, terminate the Delayed Draw Commitments, or from time to time permanently reduce the Delayed Draw Commitments; provided that (i) any such notice shall be received by the Administrative Agent not later than 11:00 a.m., Pacific time (daylight or standard, as applicable), five Business Days prior to the date of termination or reduction and (ii) any such partial reduction shall be in an aggregate amount of $5,000,000 or any whole multiple of $1,000,000 in excess thereof.  The Administrative Agent will promptly notify the Incremental Term Lenders of any such notice of termination or reduction of the Delayed Draw Commitments.  Any reduction of the Delayed Draw Commitments shall be applied to the Delayed Draw Commitments, as applicable, of each Incremental Term Lender according to its Pro Rata Share of the aggregate Delayed Draw Commitments, as applicable.  The Delayed Draw Commitment of each Incremental Term Lender will be automatically reduced by the principal amount of each Delayed Draw Term Loan made by such Incremental Term Lender upon the making of such Delayed Draw Term Loan.  All unpaid Delayed Draw Unused Fees accrued until the effective date of any termination of the Delayed Draw Commitments shall be paid on the effective date of such termination.

6.Mandatory Prepayments.  Subject to the Intercreditor Agreement, in addition to the mandatory prepayments required pursuant to Section 2.07 of the Credit Agreement, following repayment in full of the TLB-1 Facility (as defined below):

(a)Beginning with the fiscal year ending December 31, 2015, within five Business Days after the delivery of each Compliance Certificate pursuant to Section 6.02(b) of the Credit Agreement that relates to financial statements delivered pursuant to Section 6.01(a) of the Credit Agreement, the Borrower shall prepay an aggregate principal amount of Incremental Term Loans, together with accrued and unpaid interest thereon, equal to the lesser of:

(i)the Applicable ECF Percentage of Excess Cash Flow for the fiscal year covered by such financial statements (the “ECF Prepayment Amount”), minus the aggregate amount of voluntary prepayments of Incremental Term Loans made during such fiscal year (without duplication of any voluntary prepayments of Term Loans deducted from the Excess Cash Flow payment for the prior fiscal year) and since January 1 of the current fiscal year pursuant to Section 2.05(a) of the Credit Agreement; and

(ii)if the lenders under any Specified Other Term Facility (as defined herein) require any mandatory prepayment in connection with excess cash flow, an amount equal to (A) the ECF Prepayment Amount times (B) (1) the aggregate outstanding principal amount 

of such Incremental Term Loans divided by (2) the sum of the aggregate outstanding principal amount of the Incremental Term Loans, such Specified Other Term Facility and any other Specified Other Term Facility which requires a mandatory prepayment of excess cash flow, and the remaining amount of the ECF Prepayment Amount shall be used to repay the Specified Other Term Facilities which require mandatory prepayment in connection with excess cash flow.

“Applicable ECF Percentage” means, with respect to any financial statements, (a) if the Total Leverage Ratio as of the end of the fiscal year covered by such financial statements is more than 2.50 to 1.0, 50% and (b) if the Total Leverage Ratio as of the end of the fiscal year covered by such financial statements is less than or equal to 2.50 to 1.0, 0%.

“ECF Consolidated EBITDA” means, for any period, the Credit Parties and their Subsidiaries’ consolidated income before distributions plus (or minus), in each case, to the extent deducted (or added) in determining consolidated income, depreciation, amortization, interest expense, income tax expense and pre-opening expenses, plus any extraordinary losses and minus any extraordinary gains, plus any non-recurring non-cash losses (or minus any non-recurring non-cash gains), plus any non-cash charges related to fair value adjustments, minus any non-cash gains related to fair value adjustments, and plus any losses, charges or expenses resulting from any donations made by the Credit Parties relating to the Casino Reinvestment Development Authority, all as determined in accordance with GAAP.

“Excess Cash Flow” means, for any fiscal year of the Credit Parties (a) ECF Consolidated EBITDA (as defined above) for such fiscal year less (b) the sum of (i) consolidated interest expense (as defined in GAAP) actually paid in cash by the Credit Parties and their Subsidiaries during such fiscal year, plus (ii) scheduled and mandatory principal repayments of Loans that are Term Loans made during such fiscal year pursuant to Section 2.07(e) of the Credit Agreement, plus (iii) income taxes actually paid in cash by the Credit Parties and their Subsidiaries during such fiscal year, plus (iv) without duplication of the amount described in clause (iii), the Tax Amount for such fiscal year, plus (v) pre-opening expenses paid by the Credit Parties and their Subsidiaries in cash during such fiscal year, plus (vi) capital expenditures actually made in cash by the Credit Parties and their Subsidiaries in such fiscal year to the extent permitted under the Loan Documents, plus (vii) without duplication, any accrued property tax refunds of the Credit Parties and their Subsidiaries during such fiscal year, minus (viii) without duplication, any property tax refunds received in cash or applied as a credit to property taxes otherwise payable by the Credit Parties and their Subsidiaries during such fiscal year.

“Specified Other Term Facility” means, at any time, any Term Facility or other term Indebtedness of the Borrower which has a first priority Lien on the Collateral (including if such Lien is pari passu with the Lien securing any Term Facility but excluding Indebtedness secured by junior Liens and Indebtedness that is unsecured) (other than the Incremental Term Facility or the TLB-1 Facility) outstanding at such time.

“TLB-1 Facility” means the Term Facility outstanding pursuant to that certain Lender Joinder Agreement, dated as of December 16, 2013, among the Borrower, MDDC, the Administrative Agent and each Lender party thereto.

(b)Within five Business Days after the receipt by the Borrower or any other Credit Party of any cash in settlement of any disputed property tax assessment, if the Total Leverage Ratio was greater than 3.00 to 1.0 as of the most recently ended fiscal quarter of MDDC, the Borrower shall prepay an aggregate principal amount of the Incremental Term Loans in an amount equal to the lesser of:

(i)the net cash proceeds received by such Credit Party in connection therewith; and

(ii)to the extent that the lenders under any Specified Other Term Facility require any mandatory prepayment in connection with the receipt of such proceeds, an amount equal to (A) the aggregate amount of such net cash proceeds times (B) (1) the aggregate outstanding principal amount of the Incremental Term Loans divided by (2) the sum of the aggregate outstanding principal amount of the Incremental Term Loans, such Specified Other Term Facility and any other Specified Other Term Facility which requires a mandatory prepayment in connection with the receipt of such proceeds, and the remaining amount of the cash settlement shall be used to repay the Specified Other Term Facilities which require mandatory prepayment in connection with the cash settlement.

(c)All prepayments of the Incremental Term Facility made pursuant to this Section 6, pursuant to Sections 2.05 or 2.07 of the Credit Agreement or pursuant to the Intercreditor Agreement shall be applied (i) if made prior to the Delayed Draw Commitment Termination Date (or, if earlier, the date on which the Delayed Draw Commitment shall have been reduced to zero), to the remaining principal installments thereof on a ratable basis and (ii) if made on or after the Delayed Draw Commitment Termination Date (or, if earlier, the date on which the Delayed Draw Commitment shall have been reduced to zero), to the principal installments thereof in inverse order of maturity.

(d)The parties hereto agree that they will reasonably cooperate so as to permit the Incremental Term Loans to be fungible with each other.

7.Payments Generally; Prepayment Premiums  All payments of principal and interest shall be made to the Administrative Agent for the account of the Incremental Term Lenders in Dollars in immediately available funds at the Administrative Agent’s Office in accordance with the Credit Agreement; provided, that,

(a)in the event of a full or partial prepayment of Incremental Term Loans effected on or prior to the third anniversary of the Incremental Term Facility Effective Date with the proceeds of any Other Term Facility, Extended Term Facility or other Indebtedness or the issuance of Equity Interests by a Credit Party, such prepayment shall include a premium (in addition to any amounts owing in connection with such prepayment under Section 3.05 of the Credit Agreement) in an amount equal to (i) 4.00% of the principal amount so prepaid, in the case of any such prepayment on or prior to the first anniversary of the Incremental Term Facility Effective Date, (ii) 2.00% of the principal amount so prepaid, in the case of any such prepayment after the first anniversary of the Incremental Term Facility Effective Date but on or prior to the second anniversary of the Incremental Term Facility Effective Date and (iii) 1.00% of the principal amount so prepaid, in the case of any such prepayment after the second anniversary of the Incremental Term Facility Effective Date but on or prior to the third anniversary of the Incremental Term Facility Effective Date; 

(b)in the event that any amendment, restatement, amendment and restatement or other modification to this Agreement or any other Loan Document, in each case that has the effect of decreasing the Effective Yield in respect of the Incremental Term Loans (any such amendment, restatement, amendment and restatement or other modification, a “Repricing Amendment”) is effected on or prior to the third anniversary of the Incremental Term Facility Effective Date, the Borrower shall pay an amendment fee to any Lender approving such amendment or conversion (other than any 

replacement Lender replacing a Lender pursuant to Section 10.16 of the Credit Agreement in connection with such amendment) in an amount equal to (i) 4.00% of the principal amount of Incremental Term Loans for which such Effective Yield is decreased, in the case of any such amendment, restatement, amendment and restatement or other modification effected on or prior to the first anniversary of the Incremental Term Facility Effective Date, (ii) 2.00% of the principal amount of Incremental Term Loans for which such Effective Yield is decreased, in the case of any such amendment, restatement, amendment and restatement or other modification effected after the first anniversary of the Incremental Term Facility Effective Date but on or prior to the second anniversary of the Incremental Term Facility Effective Date and (iii) 1.00% of the principal amount of Incremental Term Loans for which such Effective Yield is decreased, in the case of any such amendment, restatement, amendment and restatement or other modification effected after the second anniversary of the Incremental Term Facility Effective Date but on or prior to the third anniversary of the Incremental Term Facility Effective Date; and

(c)in the event that any Non-Consenting Lender other than a Disqualified Lender is replaced as a Lender pursuant to Section 10.16(b) of the Credit Agreement on or prior to the third anniversary of the Incremental Term Facility Effective Date in connection with a Repricing Amendment, the Borrower shall pay a fee to any such Lender in an amount equal to (i) 4.00% of the principal amount of such Lender’s Incremental Term Loans being assigned pursuant to such replacement, in the case of any such replacement effected on or prior to the first anniversary of the Incremental Term Facility Effective Date, (ii) 2.00% of the principal amount of such Lender’s Incremental Term Loans being assigned pursuant to such replacement, in the case of any such replacement effected after the first anniversary of the Incremental Term Facility Effective Date but on or prior to the second anniversary of the Incremental Term Facility Effective Date and (iii) 1.00% of the principal amount of such Lender’s Incremental Term Loans being assigned pursuant to such replacement, in the case of any such replacement effected after the second anniversary of the Incremental Term Facility Effective Date but on or prior to the third anniversary of the Incremental Term Facility Effective Date.

“Effective Yield” means yield taking into account upfront fees, interest rate spreads, interest rate benchmark floors and original issue discount (with original issue discount being equated to interest based on an assumed four-year life to maturity) but excluding the effect of any arrangement, structuring, syndication or other fees payable in connection therewith that are not shared with all lenders or holders of such new or replacement loans and without taking into account any fluctuations in the Eurodollar Rate or comparable rate.

8.Covenants.

(a)From and after the Incremental Term Facility Effective Date, no Credit Party shall, and shall not permit any Subsidiary to, make or become legally obligated to make any capital expenditure, except for capital expenditures in the ordinary course of business not exceeding, in the aggregate for the Credit Parties and their Subsidiaries in any fiscal year, $40,000,000; provided that any portion of such amount (but in no case more than $10,000,000), if not expended in the fiscal year for which it is permitted, may be carried over for expenditure in the next following fiscal year (but not any fiscal years thereafter); and provided, further, if any such amount is so carried over, it will be deemed used in the applicable subsequent fiscal year before the amount permitted for such fiscal year.

(b)From and after the Incremental Term Facility Effective Date, notwithstanding the provisions of Section 7.06 of the Credit Agreement (except as expressly provided for herein), MDDC shall not make, and shall not permit any of its Subsidiaries (including the Borrower) to make, any Restricted Payment pursuant to such clause unless (i) the Total Leverage Ratio will be (x) 4.00 to 1.00 or less, after giving effect thereto,  or (y) if an Additional License Event has occurred and is continuing, 2.50 to 1.00 or less at the time thereof and, after giving effect thereto, 3.00 to 1.00 or less, (ii) such Restricted Payment is in an amount less than or equal to Cumulative Excess Cash Flow and (iii) no Default or Event of Default shall have occurred and be continuing or if a Default will result after giving effect thereto.  Notwithstanding the limitations in the prior sentence, MDDC and its Subsidiaries may make Restricted Payments permitted by Section 7.06(b) of the Credit Agreement.
  
“Additional License Event” means a casino gaming developer or operator (excluding Boyd Gaming Corporation, MDDC, the Borrower and their respective Affiliates) has received final and effective licenses, permits, franchises and other authorizations from applicable Governmental Authorities (“Gaming Approvals”) required to own, lease, operate or otherwise conduct the casino gaming business excluding online gaming licenses and video lottery terminals (i) in the State of New Jersey, but outside Atlantic County, New Jersey (“New Jersey Casinos”); or (ii) in the Commonwealth of Pennsylvania so long as, in respect of (ii) hereof, such casino gaming business is located within 75 miles (measured in a straight line) (“Contiguous Jurisdictions”) of the casino gaming business located in Atlantic City, New Jersey commonly known as The Borgata Casino Hotel & Spa (“Contiguous Jurisdiction Casinos”). For the avoidance of doubt, Gaming Approvals does not include Gaming Approvals received by New Jersey Casinos or Contiguous Jurisdiction Casinos prior to the date of this Agreement, whether or not such Gaming Approvals are renewed, reallocated or transferred within New Jersey Casinos or within Contiguous Jurisdictions after the date of this Agreement.

 “Cumulative Excess Cash Flow” means, on any date, an amount, not less than zero in the aggregate, determined on a cumulative basis equal to, without duplication, (a) Excess Cash Flow for each fiscal year commencing with the fiscal year ending December 31, 2015 minus (b) the ECF Prepayment Amount for each such fiscal year minus (c) the aggregate amount of Restricted Payments theretofore made pursuant to Section 7.06(a) of the Credit Agreement with Cumulative Excess Cash Flow.

(c)The proceeds of the Incremental Term Loans shall be used (i) in the case of the Initial Incremental Term Loans, on the Initial Borrowing Date to (x) pay fees, costs and expenses in connection with the incurrence of such Incremental Term Loans and (y) fund the redemption of the 2018 Notes, including principal, accrued and unpaid interest and premium to the redemption date, and (ii) in the case of the Delayed Draw Term Loans, on the relevant Delayed Draw Borrowing Date to (x) pay fees, costs and expenses in connection with the incurrence of such Delayed Draw Term Loans and (y) prepay, including principal, accrued and unpaid interest and premium to the date of prepayment Term Loans under any Term Facility outstanding on the relevant Delayed Draw Borrowing Date; provided, that if agreed by each Incremental Term Lender holding a Delayed Draw Commitment and to the extent not then prohibited under the Credit Agreement, after prepayment in full of all Existing Term Facilities (other than the Incremental Term Facility contemplated hereby) the proceeds of Delayed Draw Term Loans may be used to prepay principal amounts outstanding under (and accrued interest and Unused Fees in respect of) the Revolving Credit Facility.

(d)For the avoidance of any doubt, the parties hereto agree that the Incremental Term Lenders shall be treated in all respects as Term Lenders and shall have the benefit of all representations and warranties, covenants (including, without limitation, Section 7.11 of the Credit Agreement) and 

other rights and protections set forth in the Credit Agreement and the other Loan Documents on the date hereof unless specifically stated otherwise in this Agreement; provided that to the extent that any Other Term Facility or Extended Term Facility benefits from any financial covenant in addition to the financial covenant set forth in Section 7.11 of the Credit Agreement, the Incremental Term Lenders shall not have the benefit of such additional financial covenant without the prior written consent of the Borrower.

(e)Within five (5) Business Days after delivery of the financial statements referred to in Section 6.01(a) of the Credit Agreement, the Borrower shall deliver to the Administrative Agent a calculation of Cumulative Excess Cash Flow and ECF Consolidated EBITDA for the applicable fiscal year.

9.Assignments.  In addition to any consent required by Section 10.07(b) of the Credit Agreement, any assignment of an Incremental Term Commitment, Delayed Draw Commitment or Incremental Term Loan must be approved by the Borrower if such assignment is to a Term Lender under any other Term Facility (such approval not to be unreasonably withheld or delayed) so long as no Event of Default has occurred and is continuing. 

10.Representations and Warranties.  Each Loan Party hereby represents and warrants:

(a)Each Loan Party, which is party hereto, has all requisite power and authority to enter into this Agreement and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Agreement (the “Amended Agreement”) and the other Loan Documents;

(b)The execution and delivery of this Agreement and the performance of the Amended Agreement and the other Loan Documents have been duly authorized by all necessary action on the part of each Loan Party;

(c)The execution and delivery by each Loan Party of this Agreement and the performance by each Loan Party of the Amended Agreement and the other Loan Documents do not and will not (i) violate (A) any provision of any law, statute, rule or regulation, or of the certificate or articles of incorporation or partnership agreement, other constitutive documents or by-laws of MDDC, the Borrower or any other Loan Party or (B) any applicable order of any court or any rule, regulation or order of any Governmental Authority, (ii) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under any Contractual Obligation of the applicable Loan Party, where any such conflict, violation, breach or default referred to in clause (i) or (ii) of this Section 10(c), individually or in the aggregate could reasonably be expected to have a Material Adverse Effect, (iii) except as permitted under the Amended Agreement, result in or require the creation or imposition of any Lien upon any of the properties or assets of each Loan Party (other than any Liens created under any of the Loan Documents in favor of Administrative Agent on behalf of Lenders), or (iv) require any approval of stockholders or partners or any approval or consent of any Person under any Contractual Obligation of each Loan Party, except for such approvals or consents which will be obtained on or before the Incremental Term Facility Effective Date and except for any such approvals or consents the failure of which to obtain will not have a Material Adverse Effect;

(d)No action, consent or approval of, registration or filing with or any other action by any Governmental Authority is or will be required in connection with the execution and delivery by each Loan Party of this Agreement and the performance by the Credit Parties of the Amended 

Agreement and the other Loan Documents, except for such actions, consents and approvals the failure to obtain or make which could not reasonably be expected to result in a Material Adverse Effect or which have been obtained and are in full force and effect; and

(e)This Agreement has been duly executed and delivered by each of the Loan Parties party thereto and this Agreement and the Amended Agreement each constitutes a legal, valid and binding obligation of such Loan Party to the extent a party thereto, enforce-able against such Loan Party in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting creditors’ rights generally and except as enforceability may be limited by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

11.Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

12.Loan Documents.  This Agreement is a Loan Document.

13.Amendments.  Subject to the provisos to Section 10.01 of the Credit Agreement, no amendment or waiver of any provision of this Agreement, and no consent to any departure by a Credit Party or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Term Lenders under the Incremental Term Facility and the Credit Parties or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

14.Entire Agreement.  This Agreement, together with the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof and thereof and supersedes all prior agreements, written or oral, on such subject matter.  This Agreement may be amended or modified only in writing signed by each party hereto.

15.Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, the LAW OF THE STATE OF NEW YORK applicable to agreements made and to be performed entirely within such State (INCLUDING FOR SUCH PURPOSES SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK); PROVIDED THAT EACH INCREMENTAL TERM LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.
MARINA DISTRICT FINANCE COMPANY, INC.

By:    /s/ Josh Hirsberg____________________________
Name:    Josh Hirsberg
Title:    Vice President, Treasurer and Chief
Financial Officer

MARINA DISTRICT DEVELOPMENT COMPANY, LLC

By:    Marina District Development
Holding Co., LLC, a New Jersey limited
liability company
Its:    Sole Member

By:    Boyd Atlantic City, Inc.,
a New Jersey corporation
Its:    Managing Member 

By:    /s/ Josh Hirsberg____________________________
Name:    Josh Hirsberg
Title:    Vice President

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent

By:      /s/ Jennifer Havalchak_________________________    
Name:    Jennifer Havalchak
Title:    Vice President

CPPIB CREDIT INVESTMENTS III INC., as Incremental Term Lender

By:     /s/ Mark Jenkins______________________________    
Name:    Mark Jenkins
Title:    Senior Managing Director

By:     /s/ Poul Winslow_____________________________    
Name:    Poul Winslow
Title:    Authorized Signatory

Schedule I

	
			
	Incremental Term Lender
	Initial Incremental Term Commitment
	Delayed Draw Commitment

	CPPIB Credit Investments III Inc.
	$420,000,000
	$230,000,000

	Total:
	$420,000,000
	$230,000,000EX-10.2

 EXHIBIT 10.2 
  

 
  
  

SERVICE AGREEMENT BETWEEN 

IBERDROLA USA MANAGEMENT CORPORATION 

AND IBERDROLA USA, INC. 

This Service Agreement is made and entered into this 1st day of January 2014 by and
between Iberdrola USA Management Company (“Service Company”) and Iberdrola USA, Inc. (“Affiliate Company”). 

WITNESSETH 
 WHEREAS, the
Service Company was organized as a wholly-owned subsidiary service company of Iberdrola USA Networks, Inc., a subsidiary of Iberdrola USA, Inc., based upon authorization from the Securities and Exchange Commission (“SEC”) in accordance
with the requirements of Section 13(b) of the Public Utility Holding Company Act of 1935 (“35 Act”); and 
 WHEREAS, the
Energy Policy Act of 2005 (“EPAct 2005”) repealed the 35 Act and the Service Company now conducts business in accordance with applicable provisions of EPAct 2005, including but not limited to the Public Utility Holding Company Act of 2005
and the regulations of the Federal Energy Regulatory Commission (“FERC”); and 
 WHEREAS, Affiliate Company is a subsidiary
company of Iberdrola USA, Inc. and an associate of Affiliate Company; and 
 WHEREAS, Service Company and Affiliate Company have entered
into this Service Agreement whereby Affiliate Company agrees to provide and Service Company agrees to accept and pay for various services as provided herein at cost, with cost determined in accordance with applicable rules and regulations under the
Act, which require Service Company to fairly and equitably allocate costs among all associate companies to which it renders services (collectively, the “Client Companies”), including Affiliate Company. 

NOW THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties to this Service Agreement covenant and
agree as follows: 
 ARTICLE I - SERVICES 

Section 1.1 Affiliate Company shall furnish to Service Company, as requested by Service Company, upon the terms and conditions
hereinafter set forth, such of the services described in Appendix A hereto, at such times, for such periods and in such manner as Service 

 
Company may from time to time request and that Affiliate Company concludes it is able to perform. Affiliate Company shall also provide Service Company with such special services, so long as such
special services do not materially add to those services described in Appendix A hereto, as may be requested by Service Company and that Affilate Company concludes it is able to perform. In supplying such services, Affiliate Company may arrange,
where it deems appropriate, for the services of such experts, consultants, advisers, and other persons with necessary qualifications as are required for or pertinent to the provision of such services. 

Section 1.2 Service Company shall take from Affiliate Company such of the services described in Appendix A, and such additional general
or special services, as limited by subsection 1.1 hereof, as are requested from time to time by Service Company and that Affiliate Company concludes it is able to perform. 

Section 1.3 The cost of the services described herein or contemplated to be performed hereunder shall be directly assigned, distributed
or allocated by activity, project, program, internal order or other appropriate basis. Service Company shall have the right from time to time to amend or alter any activity, project, program or internal order provided that (i) any such
amendment or alteration that results in a material change in the scope of the services to be performed or equipment to be provided is agreed to by Affiliate Company, (ii) the cost for the services covered by the activity, project, program or
internal order shall include any expense incurred by Affiliate Company as a direct result of such amendment or alteration of the activity, project, program or internal order, and (iii) no amendment or alteration of an activity, project, program
or internal order shall release Service Company from liability for all costs already incurred by or contracted for by Affiliate Company pursuant to the activity, project, program or internal order, regardless of whether the services associated with
such costs have been completed. 
 Section 1.4 Affiliate Company shall determine in its sole discretion whether and how to maintain a
staff trained and experienced in the services described in Appendix A. 
 ARTICLE II – COMPENSATION 

Section 2.1 As compensation for the services to be rendered hereunder, Service Company shall pay to Affiliate Company all costs that
reasonably can be identified and related to particular services performed by Affiliate Company for or on its behalf. The methods for assigning or allocating Affiliate Company costs to Service Company, as well as the method for Service Company to
allocate costs to other associate companies, are set forth in Appendix A. 
 Section 2.2 It is the intent of this Service Agreement
that charges for services shall be distributed, to the extent possible, based upon direct assignment. Other amounts incurred to provide services requested by Service Company after direct assignment may be allocated using the methods identified in
Appendix A. The method of assignment or allocation of cost shall be subject to review by the Service Company annually, or more frequently if appropriate. Such method of assignment or allocation of costs may be modified or changed by the Service
Company without the necessity of an amendment to this Service Agreement; provided that, in each instance, all services rendered hereunder shall be at actual cost thereof, fairly and equitably 

  
 2 

 
assigned or allocated, all in accordance with the requirements of the Act and any orders promulgated there under. The Service Company shall review with the Affiliate Company any proposed material
change in the method of assignment or allocation of costs hereunder and the parties must agree to any such changes before they are implemented. 

Section 2.3 Affiliate Company shall render a monthly report to Service Company that shall reflect the information necessary to identify
the costs charged for that month in accordance with the Uniform System of Accounts for Mutual and Subsidiary Service Companies. Service Company shall remit to Affiliate Company all charges billed to it within 30 days of receipt of the monthly
report. Any amounts not paid by the due date will be subject to a late charge of .5 % per month until the remittance is received. 

Section 2.4 It is the intent of this Service Agreement that the payment for services rendered by Affiliate Company to Service Company
under this Service Agreement shall cover the costs of providing the services requested including, but not limited to, salaries and wages, office supplies and expenses, outside services employed, property insurance, injuries and damages, employee
pensions and benefits, miscellaneous general expenses, rents, maintenance of structures and equipment, depreciation and amortization, and compensation for use of capital as permitted by applicable laws and regulations. 

Section 2.5 Affiliate Company and Service Company agree that the amount of compensation to be paid by Service Company hereunder is
subject to the review and determination of the regulatory commission of the appropriate jurisdiction. 
 ARTICLE III- TERM 

This Service Agreement shall become effective as of the date first written above, subject only to the receipt of any required regulatory
approvals from any State regulatory commission with jurisdiction over Service Company, and shall continue in force until terminated by Affiliate Company or Service Company, upon not less than 90 days prior written notice to the other party. This
Service Agreement shall also be subject to termination or modification at any time, without notice, if and to the extent performance under this Service Agreement may conflict with the Act or with any rule, regulation or order of the FERC or any
State regulatory commission with jurisdiction over Service Company adopted before or after the date of this Service Agreement. 
 ARTICLE IV
- MISCELLANEOUS 
 Section 4.1 All accounts and records of Service Company shall be kept in accordance with applicable rules and
regulations promulgated by the FERC, in particular, the Uniform System of Accounts for Centralized Service Companies in effect from and after the date hereof. 

Section 4.2 New direct or indirect subsidiaries of Iberdrola USA, Inc., which may come into existence after the effective date of this
Service Agreement, may become additional associate companies of Service Company and subject to a service agreement with Service Company or the Affiliate Company. The parties hereto shall make such changes in the scope and character of the services
to be rendered and the method of assigning, distributing or allocating costs of such services as specified in Appendix A, subject to the requirements of Section 2.2, as may become necessary to achieve a fair and equitable assignment,
distribution, or allocation of Service Company costs among all associate companies including the new subsidiaries. 

  
 3 

 Section 4.3 Affiliate Company shall permit Service Company access to its accounts and
records including the basis and computation of allocations. 
 Section 4.4 Affiliate Company shall at all times keep confidential all
information disclosed to it by Service Company in the performance of this Service Agreement regardless of whether it was stated to be confidential or not, except where required by law. 

Section 4.5 If one Party (the “Pursuing Party”) gives notice to the other Party (the “Defending Party”) that there
exists between them a dispute or difference arising out of or in connection with this Service Agreement (a “Dispute”) the Parties agree to use reasonable endeavors to negotiate the resolution of the Dispute. If they are unable to resolve
the Dispute within twenty-one days from the original notice, both Parties shall refer the Dispute to its Board with a view to the Dispute being resolved by agreement between the directors of the Boards of the Pursuing Party and the Defending Party.
If the Director’s are unable to resolve the Dispute within twenty-one days from the date of referral, provided that Service Company and Client Company are both at that time members of the IBERDROLA Group, then both Parties shall refer the
Dispute to an executive director as nominated by a chief executive of IBERDROLA. 
 Section 4.6 Each party shall conduct itself in
accordance with the highest ethical standards and principles as set forth in the Code of Ethics of Iberdrola, S.A. (“Code of Ethics”) and the Iberdrola USA Annex to the Code of Ethics (“Annex”) in connection with it’s
performance under this Service Agreement. 

  
 4 

 IN WITNESS WHEREOF, the parties hereto have caused this Service Agreement to be executed as of
the date and year first above written. 
  

			
	IBERDROLA USA MANAGEMENT CORP.
		
	BY:	 	 /s/ Jose Maria Torres

	Name:	 	Jose Maria Torres
	Title:	 	Vice President and Chief Financial Officer
		
	BY:	 	 /s/ Robert P. Fitzgerald, Jr.

	Name:	 	Robert P. Fitzgerald, Jr.
	Title:	 	Assistant Controller

 The undersigned Affiliate Company requests all services described in Appendix A and listed in the Internal Order Summary
from Service Company. Services will begin January 1, 2014. 
  

			
	IBERDROLA USA, INC.
		
	BY:	 	 /s/ Robert D. Kump

	Name:	 	Robert D. Kump
	Title:	 	President and Chief Executive Officer
		
	BY:	 	 /s/ R. Scott Mahoney

	Name:	 	R. Scott Mahoney
	Title:	 	Director and Secretary

  
 5 

 Appendix A 

Description of Services to be Provided in Accordance with the 

Iberdrola USA Management Corporation Determination of 

Charges for Such Services to the Client Companies 

This document sets forth the methodologies used to accumulate the costs of services performed by Affiliate Company (“Affiliate Company”) and to
assign or allocate such costs to associate companies within Iberdrola USA, Inc. (“Client Companies”). 
 Description of Services 

A description of each of the services performed by Affiliate Company, which may be modified from time to time, is presented below. 

 

	 	1.	Accounting Services such as establishing accounting policies, the maintenance of books and records, corporate financial consolidation, preparation of financial reports, annual capital and operating plan preparation (on
a per company and corporate basis), fixed asset accounting, and compliance with applicable laws and regulations. 

  

	 	2.	Audit Services include the management of an entity-wide framework of corporate controls. 

  

	 	3.	Corporate Planning Services include the preparation of corporate plans, budgets and financial forecasts, monitoring trends and evaluating business opportunities. 

 

	 	4.	Executive Services include general and administrative management and strategic planning. 

  

	 	5.	Finance and Treasury Services include the coordination of activities relating to securities issuances, monitoring capital markets, cash management, bank reconciliation and administering insurance programs, and tax
services for the coordination of income, property and revenue tax compliance and tax accounting. 

  

	 	6.	Governmental Affairs Services include monitoring, reviewing and researching legislation and lobbying government officials. 

  

	 	7.	Accounts Payable Services include the accurate and timely payment of invoices and employee expense reports, allocation of expenses to the proper general ledger accounts, production of annual reports to the IRS,
maintenance of vendor information and source documents, processing checks and wire transfers, and performing bank reconciliations. 

  

	 	8.	Human Resources Services include the establishment and administration of employee policies, the supervision of compliance with legal requirements in the areas of employment, compensation, benefits and employee health,
welfare, and safety and contract negotiation and relations management with labor unions; and employee performance management program. May also maintain the employee master files relating to each employee as well as manage recruiting, training, and
promotions. 

  
 6 

	 	9.	Corporate Security Services include the establishment of a security program and entity-wide governance framework to manage, oversee and assist the organization in meeting its corporate, legal, and regulatory
responsibilities with regard to the protection of cyber, physical and information assets. 

  

	 	10.	Payroll Services include the supervision and coordination of the calculations, records and control requirements necessary to generate payment of employee salaries and wages and to maintain relevant employee information.

  

	 	11.	Records Retention Services include coordinating and maintaining a program for ensuring safe on- and off-site records retention in accordance with applicable regulations. 

 

	 	12.	Regulatory Management Services include coordination of the Client Companies’ rates and regulatory economics departments including rate-related compliance matters. 

 

	 	13.	Legal Services include the coordination and direction of law and regulatory departments, legal support for all of the Client Companies, including managing litigation, contract review and negotiations and participating
in state and federal regulatory proceedings. 

  

	 	14.	Other Corporate Support Services may include corporate communications services. 

  

	 	15.	Transmission and Supply Services include activities related to the coordination and direction of electric and/or gas transmission, storage, and supply functions. 

 

	 	16.	Distribution Operation Services include activities related to the coordination and direction of electric and/or gas distribution operation functions. 

 

	 	17.	Information Technology Services include centralized information technology services for the Client Companies such as Data Center Operations, IS Networking and Telecommunications systems operations and maintenance,
software applications development and maintenance, technology development, end user support, and printing and mailing of utility customer bills. 

  

	 	18.	Supply Chain Services include centralized purchasing services such as procurement of materials and supplies, fleet services, contract administration and materials management for the Client Companies. 

 

	 	19.	Customer Services include call center operations including responding to Client Companies’ customer calls, customer billing, accounts receivable, credit and collections services, customer satisfaction monitoring
and management of low income programs. 

  
 7 

	 	20.	Engineering Services include centralized customary engineering services including design engineering, general engineering, construction engineering and GIS technology development, meter services and testing and
operations. 

  

	 	21.	Commodity Planning Service includes coordination and direction of gas or electric supply planning and procurement at utility or non-utility companies. 

Affiliate Company accounting, billing and cost allocation methods utilize the “Uniform System of Accounts for Mutual Service Companies and Subsidiary
Service Companies” and are structured so as to comply with the FERC standards for service companies in registered holding-company systems. 
 Cost
Assignment 
 Affiliate Company maintains an accounting system that enables costs to be identified by Internal Order (I/O) number. These I/O numbers will
indicate whether the cost is a direct charge or the result of an allocated charge. The primary inputs to the accounting system are time reports, accounts payable invoices and journal entries. Charges for labor are calculated using the
employees’ hourly rate. All Affiliate Company employees will maintain a record of their time. Employees will utilize separate internal orders to record their activities, including the services provided directly to Client Companies. All
employees will charge their time on a daily basis using designated increments. The time sheets will be reviewed and approved by department supervisors. The wages of those employees, such as administrative assistants and secretaries, who generally
assist employees who provide services directly to system companies, will be allocated based on the allocation of the wages of the employees they assist. Time records will be maintained for three years. Indirect attributable costs are charged to the
services performed in proportion to the directly assigned costs or other appropriate cost allocations. 
 Costs will be accumulated by internal order number
and assigned as follows: 
  

	1.	Costs accumulated in an internal order number for services specifically performed for a single Client Company will be directly assigned or billed to that Client Company. 

 

	2.	Costs accumulated in an internal order number for services specifically performed for two or more Client Companies will be distributed among those Client Companies using methods determined on a case-by-case basis
consistent with the nature of the work performed and on one of the allocation methods described below. 

  

	3.	Costs accumulated in an internal order number for services of a general nature, which are applicable to all Client Companies, will be allocated among all Client Companies, including the holding company, and billed to
them using the global allocation factor. 

  
 8 

 Cost Allocation 

Affiliate Company uses cost allocation methods designed to fully distribute costs. Affiliate Company’s cost allocation methodology is comprised of the
following three steps: 
  

	1.	To “direct charge” all labor, materials and other expenses to Client Companies whenever feasible. 

  

	2.	To allocate directly attributable costs to Client Companies based upon a measurable cost causing relationship, i.e., payroll department costs are allocated on the number of employees for each Client Company.

  

	3.	To allocate indirectly attributable costs that are common to all Client Companies, including the holding company, using the global allocation factor taking into consideration the relative size of each Client Company
with regards to gross revenues, gross payroll expense and plant. 

 Costs that can be directly attributed to direct charges are allocated in
proportion to the direct charges or other appropriate cost allocations. For example, direct labor charged to prepare testimony for a specific utility not only includes the direct payroll charge (the hourly rate times the hours reported) but also
includes the cost of that individual’s proportional payroll overhead cost, and such other overheads as common asset usage, occupancy charges and management overhead charges (commonly referred in aggregate as an Administrative and General
Overhead). 
 General and administrative costs that are not associated with a specific, identifiable, causal relationship are pooled and allocated to all
system companies, including the holding company. 
 Allocation Methods 

Allocations related to Direct Labor Charges 
 The following
allocations will be applied to the Direct Labor Charges: 
 Payroll Overhead Charge will be calculated to recover costs associated with labor, such as
pension, benefits, lost time and payroll taxes. The payroll overhead costs will be charged to Client Companies based on direct labor charges. The rate is computed by dividing the annual payroll overhead expenses by the annual base labor dollars.

  
 9 

 Other Allocations applied to Direct Labor Charges will consist of the following: 

 

	1.	Common Asset Usage Overhead: 

 The Common Asset Usage Overhead allocates the cost of furniture
and desktop equipment (including PC’s) used by Service Company. The rate is calculated by dividing the economic carrying costs of the assets by the total actual labor dollars of employees using those assets. This overhead is directly applied to
all Service Company labor charged or allocated to Client Companies. 
  

	2.	Occupancy Overhead: 

 The Occupancy Overhead allocates costs related to the workspace occupied
by Service Company employees. The rate is calculated by dividing the economic carrying costs for the buildings by the total actual labor dollars of employees working in those buildings. This overhead is directly applied to all Service Company labor
charged or allocated to Client Companies. 
  

	3.	Management Overhead: 

 This overhead represents the management cost of a function within Service
Company. It is based on the ratio of Service Company supervisory wages to all other wages. This fixed rate is applied to all direct labor charged to Client Companies. 

An Alternative Allocation Applied to Direct Labor Charges or Other Direct Charges 

An alternative allocation applied to direct labor charges or other direct charges is commonly referred to as an Administrative and General Support Adder. This
overhead is a general overhead used in place of other specific administrative and general support overheads and is added to total costs of client services. The purpose is to recover indirect administrative and general expenses incurred and not
otherwise charged directly to Client Companies for certain activities. The adder also includes expenses associated with office facilities, including furniture and office equipment, used in performing these administrative functions. 

Allocations related to Distributed Services 
 The following
ratios will be used to allocate costs for services not directly assigned but pooled and allocated based on a causal measurement: 
 Number of Employees
Ratio – Based on the number of employees benefiting from the performance of a service. This ratio will be determined annually based on actual count of applicable employees at the end of the previous calendar year and may be adjusted
periodically due to a significant change. 

  
 10 

 Accounts Payable Ratio - Based on the number of invoices processed for each of the specific Client
Companies. This ratio is determined annually based on the actual count of invoices at the end of the previous calendar year and may be adjusted periodically due to a significant change. 

Number of Customers Ratio – Based on the number of customers at each Client Company benefiting from the performance of a service. This ratio will
be determined annually based on the average annual customer count and may be adjusted periodically due to a significant change. 
 Global Allocation
Factor – This formula will be determined annually based on the average of gross plant (original plant in service), gross payroll charges (salaries and wages, including overtime, shift premium and lost time, but excluding pension, payroll
taxes and other employee benefits) and gross revenues during the previous calendar year and may be adjusted for any known and reasonable quantifiable events or at such time as may be required due to significant changes. This formula is commonly
referred to as the Massachusetts Formula. 
 Regulated Global - 8 Allocation Factor – This formula is derived through utilization of the same
data as the global allocation noted above, but it is limited to data of the eight regulated utility affiliates only. The eight utility companies include NYSEG, CMP, SCG, CNG, RGE, BGC, MNG, and NHGC. 

Regulated Global – 6 Allocation Factor – This formula is derived through utilization of the same data as the Regulated Global – 8
allocation factor above, but it is limited to data of the following six utility subsidiaries: NYSEG, CMP, SCG, CNG, RGE, and BGC. 
 Regulated Global
– 5 Allocation Factor – This formula is derived through utilization of the same data as the Regulated Global – 8 allocation factor above, but it is limited to data of the following five utility subsidiaries: NYSEG, CMP, SCG, CNG,
and RGE. 
 Regulated Global – 4 Allocation Factor – This formula is derived through utilization of the same data as the Regulated Global
– 8 allocation factor above, but it is limited to data of the following four utility subsidiaries: NYSEG, CMP, SCG, and CNG. 
 Commodity –
Energy Supply Transaction System Allocation Factor – This formula is used to allocate the cost of management of the Energy Supply Transaction System to all Client Companies that benefit from this system. The formula is derived through
utilization of the gas and/or electric supply costs of the Client Companies and reflects the proportion of such costs occurring between these entities. 

Commodity - Global Allocation Factor – This formula is used to allocate the cost of commodity planning, procurement, and sale when the service is
applicable to or benefits all Client Companies, regardless of whether they are a gas, electric, or combined company. The formula is derived through utilization of the gas and/or electric supply costs of the Client Companies and reflects the
proportion of such costs occurring between these entities. 

  
 11 

 Commodity - Regulated Gas Allocation Factor – This formula is used to allocate costs for gas
commodity planning, procurement and sale for regulated gas utility Client Companies. The formula is derived through utilization of the gas supply costs of the regulated gas utility affiliates and reflects the proportion of such costs occurring
between these entities. 
 Electric Allocation Factor – This formula is used to allocate costs for the coordination and direction of electric
transmission issues for the benefit of regulated electric utility Client Companies and departments. The formula is derived through utilization of the same data as the global allocation noted above, but it is limited to data of electric operating
companies or departments. 

  
 12

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